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You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $10 million. Investment A will generate $2.3 million
You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $10 million. Investment A will generate $2.3 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $2.2 million at the end of the first year, and its revenues will grow at 4.4% per year for every year after that. Use the incremental IRR rule to correctly choose between investments A and B when the cost of capital is 7.8%. At what cost of capital would your decision change? The incremental IRR is %. (Round to two decimal places.) (Select from the drop-down menu.) You should take Investment B At what cost of capital would your decision change? (Select from the drop-down menu.) The decision would change if the cost of capital is above the IRR.
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