Question
A firm is evaluating two investment proposals. The followingdata is provided for the two investment alternatives. Initial cash outflow IRR NPV(wacc=18%) Project 1 $600 million
A firm is evaluating two investment proposals. The followingdata 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 shouldthe firm choose? What is the problem that the firm should beconcerned 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
A firm is evaluating two investment proposals. The followingdata 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 shouldthe firm choose? What is the problem that the firm should beconcerned 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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Financial Theory and Corporate Policy
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
4th edition
321127218, 978-0321179548, 321179544, 978-0321127211
