Wilderness Adventures specializes in back-country tours and resort management. T

Question

Wilderness Adventures specializes in back-country tours and resort management. Travel Excitement specializes in making travel reservations and promoting vacation travel. Wilderness Adventures has an aftertax cost of capital of 13 percent and Travel Excitement has an aftertax cost of capital of 11 percent. Both firms are considering building wilderness campgrounds complete with man-made lakes and hiking trails. The estimated net present value of such a project is estimated at $87,000 at a discount rate of 11 percent and -$12,500 at a 13 percent discount rate. Which firm or firms, if either, should accept this project?

Wilderness Adventures only Travel Excitement only both Wilderness Adventures and Travel Excitement neither Wilderness Adventures nor Travel Excitement cannot be determined without further information

Explanation / Answer

The answer in this case would be the last option: cannot be determined without further information. You will need more information figure out if this move will be beneficial for either of the two companies.

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