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A company has the option to invest in project A, project B, or neither (the projects are mutually exclusive and the company has no other
A company has the option to invest in project A, project B, or neither (the projects are mutually exclusive and the company has no other investment options). Project A requires an initial investment of $1,000,000 today and provides cash flows of $350,000 a year for five years. The project will also return back $200,000 in capital in year six. Project B requires a $1,350,000 investment today and will have cash flows of $400,000 a year for 5 years. The firm's hurdle rate (discount rate) for these projects is 8%. Based on the information above, the IRR of Project A is 8%, and the IRR of project B is O above, above O above, below below, above below, below 8%
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