As a financial officer, you must determine which project your company should accept. The projects are mutually exclusive and the net present value (NPV) calculations for each take into account the project?s risk. Indicate which project (A or B) you would recommend and explain your reasons for this recommendation.



Project A
Project B

NPV
$3 million
$2.5 million

Risk level
very risky
very safe

Project A has a higher return, but it is also riskier.

Therefore, it is your call.

I would go with Project B, its only 500,000 less, yes, 1/6, but very safe vs. very risk in Project A