2. WHICH BUSINESS WOULD YOU INVEST IN?
Business A:
Business B:
Market:  Fast growth and subject to rapid change
Management:  Young, energetic & inexperienced
Investment: £1 million
Payback period: 1.5 years
NPV: £+350k using a 10% discount factor
Market:  Very low growth and highly predictable
Management:  Experienced and cautious
Payback period: 2.5 years
NPV: £+10k using a 20% discount factor

3. What about the npv? Business A
relatively low discount factor of 10% for their NPV calculations rather than Business B who used a higher discount factor (which takes better account of risk). In general, using a low discount factor tends to make NPV calculations look more favourable and can lead to a firm accepting a project when it might be better to reject it.