Does such slim return on investment create too much risky

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Reference no: EM132025195

Corporations that embark on new projects, whether big or small, establish policies to determine whether the return on investment justifies the potential risk associated with the project. In Chapter 8, we learn about Net Present Value, which establishes a policy/rule that if the NPV is positive we accept the project, otherwise we reject the project. In a perfect world, this concept seems practical and makes sense. However, does this one-size fits all, black and white, approach to financial decision making always work in the real world? If a project’s initial outlay is $100 million, and the return on the investment is $100,000, should we really accept the project, or does such a slim return on investment create too much risky?

Reference no: EM132025195

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