1) You are going to choose one of two investments. Both investments cost £80000, but investment A pays £35000 a year for 4 years and investment B pays £30000 a year for five years. If your required return is 13% which should you choose? a. A because it pays back sooner b. A because its IRR exceeds 13% c. A because it has a higher IRR d. B because its IRR exceeds 13% e. B because it has a higher NPV
1) You are going to choose one of two investments. Both investments cost £80000, but investment A pays £35000 a year for 4 years and investment B pays £30000 a year for five years. If your required return is 13% which should you choose? a. A because it pays back sooner b. A because its IRR exceeds 13% c. A because it has a higher IRR d. B because its IRR exceeds 13% e. B because it has a higher NPV
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1) You are going to choose one of two investments. Both investments cost £80000, but investment A pays £35000 a year for 4 years and investment B pays £30000 a year for five years. If your required return is 13% which should you choose?
a. A because it pays back sooner
b. A because its IRR exceeds 13%
c. A because it has a higher IRR
d. B because its IRR exceeds 13%
e. B because it has a higher NPV
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