When the Amount Invested Differs Substantially Across Projects, NPV Is

question 18

Essay

When the amount invested differs substantially across projects, NPV is of limited value for comparison purposes. You have evaluated three projects of substantially different investment amounts using the net present value (NPV) method. How would you decide which one of the projects to select?

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Definitions:

Keynesians

Economists and followers of the economic theories of John Maynard Keynes, focusing on government intervention to mitigate the adverse effects of economic recessions.

Government Intervention

Involves actions taken by a government to affect the economy, typically through regulations, subsidies, tariffs, or monetary policies.

Depressions

Extended periods of economic downturn marked by severe declines in GDP, high unemployment, low consumer spending, and deflation, more intense and lasting longer than recessions.

Classical Economists

A group of economists in the late 18th and early 19th centuries who believed in free markets, the invisible hand guiding economies, and the theories of supply and demand.