Evaluating two competing investments
Evaluating two competing investments
Financial Management
A company is evaluating two competing investments. Investment X has a cost of
$100,000 and a NPV estimated at $35,000. Investment Y has a cost of $220,000 and a
NPV estimated at $35,500. Taking everything into account, you would recommend the
company undertake which investment and why?
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a. Neither investment is acceptable.
b. Not sure. Need additional information.
c. Take investment X, since it has almost the same value creating potential, but
costs a fraction of Y. Do something else with the $120,000 saved up front.
d. Undertake investment Y as it produces more shareholder value.