You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $ 9.7 million

$9.7million. Investment A will generate $ 1.93

$1.93 million per year(starting at the end of the firstyear) in perpetuity. Investment B will generate $ 1.49

$1.49 million at the end of the firstyear, and its revenues will grow at 2.7 %

2.7% 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 7.7 %

7.7%?

c. In thiscase, when does picking the higher IRR give the correct answer as to which investment is the bestopportunity?