In: Finance
DGO Corporation has to decide whether to undertake project 1 or project 2. The projects have the following initial investments and future net revenues:
. |
Project 1 | Project 2 |
Initial investment |
$34,000 | $40,000 |
Net revenue in 2021 |
$25,000 | $35,000 |
Net revenue in 2022 |
$30,000 | $45,000 |
Using IP method and a discount rate of 12%, which project would you recommend? Why or why not. This in reference to Profitability Index