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Memphic Memphic
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6 years ago
Assume that the risk-free interest rate is 10%.  Rank each of the four projects from most desirable to least desirable based upon NPV.  Which project would you invest in first?  Are there any projects that you wouldn't invest in?
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
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6 years ago
Ranking
1.   NPV beta = 15 - 12/1.1 = 4.09
2.   NPV delta = -16 + 21/1.1 = 3.09
3.   NPV alpha = -18 + 23/1.1 = 2.91

Would never invest in gamma.  NPV gamma = 15 - 20/1.1 = -3.18
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