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?
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.
