You have been asked to compare three alternative


You have been asked to compare three alternative investments and make a recommendation.

  • Project A has an initial investment of $5 million, and after-tax cashflows of $ 2.5 million a year for the next five years.
  • Project B has no initial investment, has after-tax cash flows of $ 1 million a year for the next ten years, and a salvage value of $2 million (from working capital).
  • Project C has an initial investment of $10 million, another investment of $5 million in ten years, and after-tax cashflows of $ 2.5 million a year forever.

The discount rate is 10% for all three projects.

Which of the three projects would you pick? Why?

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Business Management: You have been asked to compare three alternative
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