Question
Velma and Keota (V&K) is a partnership that is considering two alternative investment opportunities. The first investment opportunity will have a three-year useful life, will
Velma and Keota (V&K) is a partnership that is considering two alternative investment opportunities. The first investment opportunity will have a three-year useful life, will cost $10,884.57, and will generate expected cash inflows of $4,300 per year. The second investment is expected to have a useful life of five years, will cost $11,895.76, and will generate expected cash inflows of $3,300 per year. Assume that V&K has the funds available to accept only one of the opportunities. (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided.
Required
Calculate the internal rate of return of each investment opportunity. Note: Do not round intermediate calculations. Based on the internal rates of return, which opportunity should V&K select?
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