Question
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
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 $1.9 million at the end of the first year, and its revenues will grow at 2.9% 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 7.4%. At what cost of capital would your decision change?
I've looked at the other similar questions, but still do not understand how to solve for r.
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