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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 firstyear) in perpetuity. Investment B will generate $1.6 million at the end of the firstyear, and its revenues will grow at 3.9 % 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 7.2%.
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