American Steel Corporation is considering two investments. One is the purchase o

Question

American Steel Corporation is considering two investments. One is the purchase of a new continous caster costing $100 million. The expected net present value of this project is $20 million. The other altermative is the purchase of a supermarket chain, also costing $100 million. It, too, has an expected net present value of $20 million. The firm's management is interested in reducing the variability of its earnings. A) Which project should the company invest in? B) What assumptions did you make to arrive at this decision?

Explanation / Answer

may be the following address can hlp u. http://books.google.co.in/books?id=R6F-ZV-10PYC&pg=PA420&lpg=PA420&dq=American+Steel+Corporation+is+considering+two+investments.+One+is+the+purchase+of+a+new+continuous+caster+costing+$100+million.+The+expected+net+present+value+of+this+project+is+$20+million.+The+other+alternative+is+the+purchase+of+a+supermarket+chain,+also+costing+$100+million.+It,+too,+has+an+expected+net+present+value+of+$20+million.+The+firm's+management+is+interested+in+reducing+the+variability+of+its+earnings.+A)+Which+project+should+the+company+invest+in?+B)+What+assumptions+did+you+make+to+arrive+at+this+decision&source=bl&ots=ohe7uHLUe3&sig=uBX-U_1U-CCd9pFH5ut-rsZ950c&hl=en&sa=X&ei=JXH8UOe_KoT9rAfU_4DQCA&ved=0CEYQ6AEwAg

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