Question: Consider the following two mutually exclusive projects: Cash Flows ($thousands) Project C 0 C 1 C 2 C 3 A -9,000 6,000 6,500 4,000 0

Consider the following two mutually exclusive projects:

Cash Flows ($thousands)

Project

C0

C1

C2

C3

A

-9,000

6,000

6,500

4,000

0

B

-9,000

1,300 In perpetuity

Question: What is the IRR for project B?

Note: This project is a perpetuity with initial investment = -9,000, and it generates equal cash flows of 1,300 in perpetuity.

Multiple Choice

a.16.7%

b.14.4%

c.15.7%

d.17.8%

e.10.7%

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