An investor is considering the two investments shown above. Her cost of capital is 8%. Which of the following statements about these investments is true?
A) The investor should take investment A since it has a greater net present value (NP
V).
B) The investor should take investment A since it has a greater internal rate of return (IR
R).
C) The investor should take investment B since it has a greater net present value (NP
V).
D) The investor should take investment B since it has a greater internal rate of return (IR

Question

An investor is considering the two investments shown above. Her cost of capital is 8%. Which of the following statements about these investments is true?
A) The investor should take investment A since it has a greater net present value (NP
V). 
B) The investor should take investment A since it has a greater internal rate of return (IR
R). 
C) The investor should take investment B since it has a greater net present value (NP
V). 
D) The investor should take investment B since it has a greater internal rate of return (IR

Quizplus · Accepted Answer

C) Using a financial calculator, NPV(A) = $17,629;
NPV(B) = $44,048;
comparison of NPV is used to decide between mutually exclusive projects.

An Investor Is Considering the Two Investments Shown Above