Question
A firm is evaluating two investment proposals. The following data is provided for the two investment alternatives. Initial cash outflow IRR NPV(wacc=18%) Project 1 $600
A firm is evaluating two investment proposals. The following data is provided for the two investment alternatives.
|
| Initial cash outflow | IRR | NPV(wacc=18%) |
| Project 1 | $600 million | 25% | $100m |
| Project 2 | $200 million | 40% | $20m |
If the two projects are mutually exclusive, which project should the firm choose? What is the problem that the firm should be concerned with in making this decision?
Question 3 options:
| Project 2; differences in scale | |
| Project 1; differences in discount rate | |
| Project 1; differences in scale | |
| Project 2; differences in discount rate |
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