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Supplier of computer safeguard systems-evaluate average-risk

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Virus Stopper Inc., a supplier of computer safeguard systems, uses a cost of capital of 10 percent to evaluate average-risk projects, and it adds or subtracts 3 percentage points to evaluate projects of more or less risk. Currently, two mutually exclusive projects are under consideration. Both have a cost of $ 314 and will last 4 years. Project A, a riskier-than- average project, will produce annual end of year cash flows of $ 96. Project B, of less than average risk, will produce cash flows of $ 312 at the end of Years 3 and 4 only.

Reference no: EM131891549

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