Question: Question 7 [ 25 points] Use the following information regarding two mutually exclusive projects to answer the following five questions: Option 1: This investment will

Question 7 [ 25 points] Use the following information regarding two mutually exclusive projects to answer the following five questions: Option 1: This investment will cost you $35,000 today. You expect to receive $15,000 in Year 1, $28,000 in Year 2, and $3,500 in Year 3. Option 2: This investment will cost you $18,000. You expect to receive $14,000 in Year 1, -$2,500 in Year 2, and $7,500 in Year 3. The discount rate on both projects is 12.0%.

What is the IRR on the incremental cash flows? Which project should you accept?

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