Hosier and Wogan (H&W) is a partnership that owns a small company. It is considering two alternative

Question:

Hosier and Wogan (H&W) is a that owns a small company. It is considering two alternative investment opportunities. The first investment opportunity will have a five-year useful life, will cost $9,840.48, and will generate expected cash inflows of $2,400 per year. The second investment is expected to have a useful life of three years, will cost $6,442.74, and will generate expected cash inflows of $2,500 per year. Assume that H&W has the funds available to accept only one of the opportunities.

Required
a. Calculate the of each investment opportunity.
b. Based on the internal rates of return, which opportunity should H&W select?
c. Discuss other factors that H&W should consider in the investment decision.

Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...