Project a Generates $5,000

question 32

Multiple Choice

Project A generates $5,000.00 in revenue two years from today and costs $4,000.00. Project B generates $4,000.00 (50% probability) or $6,000.00 (50% probability) one year from today and costs $4,500.00. Assuming a discount rate of 12% for both projects, which project does a risk averse manager prefer?

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

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