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Microeconomics II
book

Microeconomics II

by D.N. Dwivedi
August 2011
Intermediate to advanced content levelIntermediate to advanced
368 pages
14h 51m
English
Pearson India
Content preview from Microeconomics II
236 Chapter 10
or
140
1
130
1
2
( )
( )
+
=
+
r
r
( )
( )
1
1
140
130
2
+
+
=
r
r
or
(1 + r) = 1.077
r = 0.077 or 7.7 per cent
From the foregoing calculations, we infer that at 7.7 per cent rate of return (or interest) both the proj-
ects are equally acceptable or rejectable. If rate of return is less than 7.7 per cent, Project A is preferable
because its NVP is higher than that of Project B. But, if the rate of return is greater than 7.7 per cent,
Project B is preferable because its NPV is higher than that of Project A. It follows that a rm paying inter-
est below 7.7 per cent will prefer Project A, even though it will have to wait longer to recover its initial
cost. ...
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Publisher Resources

ISBN: 9788131797655