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?
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

Question

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? 
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

Quizplus · Accepted Answer

The Answer of 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? 
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