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In: Finance

​Time: Investment​ A: Investment​ B: 0 A: − $2 million B: − $2 million 1 A:...

​Time: Investment​ A:

Investment​ B:

0

A: − $2 million

B: − $2 million

1

A: $600,000

B: $1,000,000

2

A: $800,000

B: $800,000

3

A: $1,000,000

B: $600,000

An investor is considering the two investments shown above. Her cost of capital is 7​%. Which of the following statements about these investments is​ true?

  1. The investor should take investment A since it has a greater internal rate of return​ (IRR).

  2. The investor should take investment B since it has a greater net present value​ (NPV).

  3. The investor should take investment A since it has a greater net present value​ (NPV).

  4. The investor should take investment B since it has a greater internal rate of return​ (IRR).

The correct answer is The investor should take investment B since it has a greater net present value​ (NPV). Please can you show step by step how to get this answer and not use excel thank you.

Solutions

Expert Solution

jeff jeffy answered 5 months ago
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