Real Time Systems Inc.is considering the development of one of two mutually exclusive new computer models.Each will require a net investment of $5,000.The cash flow figures for each project are shown below: Model B, which will use a new type of laser disk drive, is considered a high-risk project, while Model A is of average risk.Real Time adds 2 percentage points to arrive at a risk-adjusted discount rate when evaluating a high-risk project.The rate used for average risk projects is 12 percent.Which of the following statements regarding the NPVs for Models A and B is most correct?

Question

Real Time Systems Inc.is considering the development of one of two mutually exclusive new computer models.Each will require a net investment of $5,000.The cash flow figures for each project are shown below:  Model B, which will use a new type of laser disk drive, is considered a high-risk project, while Model A is of average risk.Real Time adds 2 percentage points to arrive at a risk-adjusted discount rate when evaluating a high-risk project.The rate used for average risk projects is 12 percent.Which of the following statements regarding the NPVs for Models A and B is most correct?

Quizplus · Accepted Answer

The Answer of Real Time Systems Inc.is considering the development of one of two mutually exclusive new computer models.Each will require a net investment of $5,000.The cash flow figures for each project are shown below:  Model B, which will use a new type of laser disk drive, is considered a high-risk project, while Model A is of average risk.Real Time adds 2 percentage points to arrive at a risk-adjusted discount rate when evaluating a high-risk project.The rate used for average risk projects is 12 percent.Which of the following statements regarding the NPVs for Models A and B is most correct?