Question: you are deciding between two mutually exclusive investment opportunities both...
You are deciding between two mutually exclusive investment
opportunities. Both require the same initial investment of
$10 million. Investment A will generate $2.2 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.8 million at the end of the first year, and its revenues will grow at 3.9% per year for every year after that. Use the incremental IRR rule to correctly choose between investments A and B when the cost of capital is 6.7%.
The incremental IRR is %. (Round to two decimal places.)
You should take Investment A or Investment B