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Business, 07.05.2020 06:59 kimjp56io5

You are deciding between two mutually exclusive investment opportunities. both require the same initial investment of $ 10.1 million. investment a will generate $ 1.97 million per year (starting at the end of the first year) in perpetuity. investment b will generate $ 1.58 million at the end of the first year, and its revenues will grow at 2.9 % 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 5.2 %?

c. in this case, for what values of the cost of capital does picking the higher irr give the correct answer as to which investment is the best opportunity?

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