You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $ 9.6 million. Investment A will generate $ 1.98 million per year(starting at the end of the firstyear) in perpetuity. Investment B will generate $ 1.45

million at the end of the firstyear, and its revenues will grow at 2.3 % per year for every year after that.

a. Which investment has the higherIRR?

• IRR of investment A
• IRR of investment B

b. Which investment has the higher NPV when the cost of capital is 7.8 %?

c. In thiscase, for what values of the cost of capital does picking the higher IRR give the correct answer as to which investment is the bestopportunity?