Startup costs for Lowes expansion into Colombia are projecte

Startup costs for Lowe\'s expansion into Colombia are projected to be $300 million, while their costs to expand into Brazil are estimated to be $380 million. Given projected revenues for both projects, the company\'s cost of capital, and using net present value as your evaluation tool, which project should be considered first?

Solution

Irrespective of the amount of startup costs , we are using net present value as tool to make decision. If all the information is given then the project which is having the highest NPV needs to be considered between the two.