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What cost of capital would your decision change

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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 $2.1 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.9 million at the end of the first year, and its revenues will grow at 3.5% 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 7.9%. At what cost of capital would your decision change?

Reference no: EM133121899

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