Project a Will Generate $10,000

question 109

Multiple Choice

Project A will generate $10,000.00 of revenue next year. Project B will generate $5,000.00 (50% probability) or $15,000.00 (50% probability) of revenue next year. Assuming both projects cost $8,000.00 and have a 10% APR discount rate, which project is preferred by a risk averse manager?

• A)Project A
• B)Project B
• C)Neither project
• D)Cannot be determined