Assuming a discount rate of 11.0 percent, this project has a projected NPV of $218.57 (details omitted) and therefore should be accepted.
The issue, however, is whether a rational decision-maker/manager would be motivated to accept the investment given the projected accounting rates of return over the coming three years. If compensation is tied to reported ROI, there may be a disincentive to invest, in spite of the fact that accepting the project would be consistent with adding shareholder value. This disincentive would be stronge