Question: Your firm has identified three potential investment projects. The projects and their cash flows are shown here:
Project Cash Flow Today Cash Flow in One Year
A -10 20
B 5 5
C 20 -10
Suppose all cash flows are certain and the risk-free interest rate is 10%
a. What is the NPV of each project?
b. If the firm can choose only one of these projects, which should it choose?
c. If the firm can choose two of these projects, which should it choose?