What return should the average investor expect to receive

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For the given cash flows below, assume the cash flow is the same in the next 2 years. Compute the NPV for each project, and compute the incremental IRR. Compare and explain why NPV always gives the correct decision.

Project Initial Investment Year 1 Cash Flow

A 500,000 125,000

B 500,000 120,000

QUESTION: Why should investors who identify positive-NPV trades be skeptical about their findings if they don’t inside information or a competitive advantage? What return should the average investor expect to receive?

Reference no: EM13953854

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