Which investment has the higher irr

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You are deciding betweentwo mutually exclusiveinvestment opportunities. Both requirethe same initial investment of $10 million. Investment A will generate$2 million per year (startingat the end of the first year) in perpetuity. Investment B will generate $1.5 millionat the end ofthefirst year and its revenueswill grow at 2% per year for every year after that.

-Which investment has the higher IRR?

-Which investment has the higher NPV when the cost of capital is 7%?

-In this case, for what values of the cost of capitaldoes picking the higher IRR give the correctanswer as to which investment is the best opportunity?

Reference no: EM133062517

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