Question
In: Finance
You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of...
You are deciding between two mutually exclusive investment
opportunities. Both require the same initial investment of .
Investment A will generate million per year (starting at the end
of the first year) in perpetuity. Investment B will generate
million at the end of the first year, and its revenues will grow
at per year for every year after that.
a. Which investment has the higher IRR?
b. Which investment has the higher NPV when the cost of
capital is ?
c. In this case, when does picking the higher IRR give the
correct answer as to which investment is the best
opportunity?
a. Which investment has the higher IRR?
The IRR of investment A is
nothing%. (Round to two decimal places.)
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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Project B requires an investment of $1,000 at t = 0 and generates a
cash flow of $60 at t = 1. After
t=1thecashflowgrowsattherateof4%inperpetuity (so the cash flow
att=2 is 4% higher than the cash flow at t = 1, the cash flow at t
=...
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