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Business, 28.02.2020 18:50 jason9394

You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $ 10 million. Investment A will generate $ 2.4 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $ 1.8 million at the end of the first year, and its revenues will grow at 4.5 % 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 6.4 %. At what cost of capital would your decision change?

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