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19.You are a real estate agent thinking of placing a sign advertising your services at a local bus stop. The sign will cost $5,000 and will be posted for one year. You expect that it will generate additional revenue of $500 per month. What is the payback period?21.You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $10 million. Investment A will generate $2 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.5 million at the end of the first year and its revenues will grow at 2% per year for every year after that.a. Which investment has the higher IRR?
b. Which investment has the higher NPV when the cost of capital is 7%?c. In this case, for what values of the cost of capital does picking the higher IRR give the correct answer as to which investment is the best opportunity?Chapter 8 (260–262)