Assume your require a 10 percent return on your investment


Consider the following two mutually exclusive projects:

Year                      Cash Flow A                      Cash Flow B

0                             -300 000                              -40,000

1                             20 000                                  19 000

2                             50 000                                  12 000

3                             50 000                                  18 000

4                            390 000                                  10 500

Assume your require a 10 percent return on your investment. Suppose you calculate the IRR of the projects and find the following: IRRA = 16.2% and IRR B = 19.55%. If you apply the IRR criterion, which investment will you choose? Why? No calculations required.

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Financial Management: Assume your require a 10 percent return on your investment
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