29. You are deciding between two mutually exclusive investment

opportunities. Both require the same initial investment of $10 million.

Investment A will generate $2 million per year (starting at the end of the

first year) in perpetuity. Investment B will generate $1.5 million at the

end of the first year and its revenues will grow at 2% 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 7%?

c. In this case, when does picking the higher IRR give the correct answer

as to which investment is the better opportunity?