You are deciding between two mutually exclusive investment projects. Both require the same upfront investment of $9.8
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You are deciding between two mutually exclusive investment projects. Both require the same upfront investment of $9.8 million. Investment A will generate $2 million per year in perpetuity (starting from the end of the first year) and Investment B will generate $1.45 million per year at the end of first year and, after the first year, its revenue will grow at 2.6% per year in perpetuity. The discount rate is 7.8%.
- Which project has a higher IRR?
- Which project would you choose to invest? Why?
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