Question
Time: Investment A: Investment B: 0 A: $2 million B: $2 million 1 A: $600,000 B: $1,000,000 2 A: $800,000 B: $800,000 3 A: $1,000,000
Time: Investment A:
Investment B:
0
A: $2 million
B: $2 million
1
A: $600,000
B: $1,000,000
2
A: $800,000
B: $800,000
3
A: $1,000,000
B: $600,000
An investor is considering the two investments shown above. Her cost of capital is 7%. Which of the following statements about these investments is true?
-
The investor should take investment A since it has a greater internal rate of return (IRR).
-
The investor should take investment B since it has a greater net present value (NPV).
-
The investor should take investment A since it has a greater net present value (NPV).
-
The investor should take investment B since it has a greater internal rate of return (IRR).
The correct answer is The investor should take investment B since it has a greater net present value (NPV). Please can you show step by step how to get this answer and not use excel thank you.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started