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

$9.69

million. Investment A will generate

$2.19

million per year (starting at the end of the first year) in perpetuity. Investment B will generate

$1.43

million at the end of the first year, and its revenues will grow at

2.3%

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

6.4%?

c. In this case, when does picking the higher IRR give the correct answer as to which investment is the best opportunity?