Question: The initial investment and expected profits from two mutually exclusive capital investments being considered by a firm are as follows: a. Calculate the internal rate

The initial investment and expected profits from two mutually exclusive capital investments being considered by a firm are as follows:

a. Calculate the internal rate of return for each investment. Which one would be selected based on an IRR ranking?
b. Which investment should be chosen if the firm€™s cost of capital is 14%?
c. Which investment should be chosen if the firm€™s cost of capital is 17%?

Investment A (S) Investment B (S) Initial investment Year I proft Year 2 profit 70,000 30,000 80,000 65,000 50,000 50,000

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