Question

Joe and rich are both considering investing in a project that costs $25,500 and is expected to produce cash inflows of $15,800 in year 1 and $15,300 in year 2. joe has a required return of 8.5 percent but rich demands a return of 12.5 percent. who, if either, should accept this project?
a.joe, but not rich
b.rich, but not joe
c.neither joe nor rich
d.both joe and rich
e.joe, and possibly rich, who will be neutral on this decision as his net present value will equal zero

Answer 1

The ones that should consider investing or accept the project is both Joe and Rich because even if Joe has a required return of 8.5 % and Rich demands for a return of 12.5 %, they can still accept the project as they have the capability of investing with the project that they are to accept.