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You are the CFO of a business and have the opportunity to evaluate two different investment opportunities. Information related to these investments follows: Investment Cost
You are the CFO of a business and have the opportunity to evaluate two different investment opportunities. Information related to these investments follows: Investment Cost Salvage Value Useful Life Required Rate of Return Sales Variable Costs Fixed Costs (excluding depreciation) Tax Rate Investment 1 $ 800,000 $ 40,000 8 years 10% $ 450,000 $ 150,000 Investment 2 $ 500,000 $ 50,000 15 years 10% $ 400,000 $ 175,000 $ 100,000 35% $ 150,000 35% Your company has a required rate of return of 10% for all new investments and is sub to a tax rate of 35%. Investment 1 Investment 2 What interest rate (Link to list below)? Based on IRR only, which investment is better (Link to List Below)? Investment 1 Investment Choices - Select from this list: Investment 1 Investment 2
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