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Note that CF1 is a weighted average of possible future outcomes, about which it is possible for different investors to have different beliefs and risk preferences. NPV = -I + sum(p(i) * CFi1) /(1+k) across i possible outcomes If your beliefs about B give you confidence it's on the efficient frontier, then there is indeed no reason to buy A. B is already ...


The assumption that the discount rate should be derived from the IRR of an alternative investment is not correct. Commonly the WACC of the company (or the WACC of the funds needed for the investment if it is standalone) is used. If this is not available, you could make use of a combination of publicly available rates and some risk-adjustments: risk-free ...

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