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?
$$\begin{array} { l c c }
\text { Year } & \text { Airplane } & \text { Weather Machine } \
0 & - 900 & - 900 \
1 & 500 & 550 \
2 & 600 & 600 \
3 & & 685
\end{array}$$
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?
$$\begin{array} { l c c } 
\text { Year } & \text { Airplane } & \text { Weather Machine } \
0 & - 900 & - 900 \
1 & 500 & 550 \
2 & 600 & 600 \
3 & & 685
\end{array}$$
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?
$$\begin{array} { l c c } 
\text { Year } & \text { Airplane } & \text { Weather Machine } \
0 & - 900 & - 900 \
1 & 500 & 550 \
2 & 600 & 600 \
3 & & 685
\end{array}$$
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

RainMan Inc A) Airplane Because Is Has a Higher NPV B) Weather

RainMan Inc A) Airplane Because Is Has a Higher NPV
B) Weather