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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 million per
You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $10 million. Investment A will generate $2 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.5 million at the end of the first year and its cash flows will grow at 2% per year for every year after that."
a. Which investment has the higher IRR?"
b. Which investment has the higher NPV when the cost of capital is 7%?" C. Which method will lead to a correct decision?
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