You are deciding between two mutually exclusive investment
Subject: Business   / Finance
Question
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You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $10.3million. Investment A will generate $1.89million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.43million at the end of the first year, and its revenues will grow at 2.8%per year for every year after that.
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A. Which investment has the higher IRR?
B. Which investment has the higher NPV when the cost of capital is 7.6 %?
