Assume you have 3 projects with the following cash flows, and the projects are independent. The cost of capital is 3% and the required rate of return is 20%.
|
Year
|
0
|
1
|
2
|
3
|
4
|
|
Project 1
|
-250
|
100
|
100
|
150
|
220
|
|
Project 2
|
-825
|
0
|
0
|
7000
|
-6500
|
|
Project 3
|
-20
|
40
|
60
|
80
|
-245
|
1) To make the investment decisions, how many investment decision rules do you have for each project? Discuss briefly about each rule.
2) Which project/projects should you choose? Explain.