Question
Frank Holey, the CEO of Doughnuts Ltd, is evaluating the following two mutually exclusive Year 0 Year 1 $ Year 2 $ Project A -8000
Frank Holey, the CEO of Doughnuts Ltd, is evaluating the following two mutually exclusive
|
| Year 0 | Year 1 $ | Year 2 $ |
| Project A | -8000 | 4820 | 5860 |
| Project B | -5000 | 2850 | 4200 |
Determine the IRR for each. If Frank chooses the project with the higher IRR, under what circumstances will his choice be incorrect? At what discount rate would he be indifferent between the two projects?
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Pricing And Hedging Financial Derivatives A Guide For Practitioners
Authors: Leonardo Marroni, Irene Perdomo
1st Edition
1119953715, 978-1119953715
