Problem:
A colleague has evaluated projects using the firm's average discount rate, which is the discount rate on the average risk project of the firm. He produced the following report:
Project NPV IRR Risk
A (800) 9.5% Average
B (450) 10.0% Low
C $1500 12.5% High
D 0 110.0% Low
If a project has a risk that is different from average, your firm usually adjusts the discount rate by adding or subtracting 2 percentage points. Suppose the four projects listed below are independent. Which project (s), you should choose and then why?
Explain in detail and show all work.