Two mutually exclusive alternatives A and B are being considered: Year A 1 A 2 0 1 2 3 5 -$2500 $746 $746 $746 $746 $746 -$6000 $1664 $1664 $1664 $1664 $1664 4 The minimum attractive rate of return is 8%. After calculation we can find that the internal rates of return: for A 1, IRRA1 = 16%, for B, IRRA2 = 13% and for A 2-A 1, IRRA2-A1 = 9.8%. Which of the following statements is correct? Select neither A 1 nor A 2 because IRRA 1 > MARR and IRRA 2 > MARR Select A 1 because IRRA 1 > IRRA 2 Select A 1 because IRRA 2-A 1 > MARR select A 2 because IRR 2-1 > MARR
Two mutually exclusive alternatives A and B are being considered: Year A 1 A 2 0 1 2 3 5 -$2500 $746 $746 $746 $746 $746 -$6000 $1664 $1664 $1664 $1664 $1664 4 The minimum attractive rate of return is 8%. After calculation we can find that the internal rates of return: for A 1, IRRA1 = 16%, for B, IRRA2 = 13% and for A 2-A 1, IRRA2-A1 = 9.8%. Which of the following statements is correct? Select neither A 1 nor A 2 because IRRA 1 > MARR and IRRA 2 > MARR Select A 1 because IRRA 1 > IRRA 2 Select A 1 because IRRA 2-A 1 > MARR select A 2 because IRR 2-1 > MARR
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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Answer the given question with a proper explanation and step-by-step solution. Please provide the answer using the math tool otherwise I give the downvote.
Transcribed Image Text:Two mutually exclusive alternatives A and B are being considered:
Year
A 1
A 2
0
1
2
3
4
-$2500
$746
$746
$746 $746
-$6000 $1664 $1664 $1664 $1664
5
$746
$1664
The minimum attractive rate of return is 8%. After calculation we can find
that the internal rates of return: for A 1, IRRA1 = 16%, for B, IRRA2 = 13%
and for A 2-A 1, IRRA2-A1 = 9.8%. Which of the following statements is
correct?
Select neither A 1 nor A 2 because IRRA 1 > MARR and IRRA 2 >
MARR
Select A 1 because IRRA 1 > IRRA 2
Select A 1 because IRRA 2-A 1 > MARR
select A 2 because IRR 2-1 > MARR
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