Black Ridge financial has been presented with 2 possible expansion opportunities.

The first is to start a new branch in Canada, while the second option would be to start a new branch in Ireland. Details regarding the projects is below :

	Year	1	2	3
Canada	CF	$            (100,000)	$       (60,000)	$        275,000
Ireland	CF	$         (3,000,000)	$   1,500,000	$     4,000,000
	Cost of Equity	15%
	Cost of Debt	7%
	Total Equity	$        15,000,000
	Total Debt	$          6,000,000

 

If the firm only has the ability to pursue one project, which one should they pick and why?

Canada because the IRR is 31% compared to Ireland's 20%?

Ireland because the NPV is lower than the cost of capital?

Ireland because the internal rate of return is 4.6% higher ?

Canada because it has a higher NPV?

Answer rating: 100% (QA)

The correct answer is Canada because it has a higher NPV The NPV Net Present Value of a project is calculated by taking the present value of all expec... View the full answer