RainMan Inc A) Airplane Because Is Has a Higher NPV
B) Weather

question 45

Multiple Choice

RainMan Inc. is in the business of producing rain upon request. They must decide between two investment projects; a new airplane for seeding rain clouds or a new weather control machine built by Dr. Nutzbaum. The discount rate for the new airplane is 9%, while the discount rate for the weather machine is 39% (it happens to be higher risk) . Which investment should the company select and why?
$$\begin{array} { l c c } \text { Year } & \text { Airplane } & \text { Weather Machine } \\0 & - 900 & - 900 \\1 & 500 & 550 \\2 & 600 & 600 \\3 & & 685\end{array}$$

• A) Airplane because is has a higher NPV
• B) Weather machine because is has a higher NPV
• C) Airplane because is has a higher annuity
• D) Weather machine because is has a higher annuity