You Are Going to Choose Between Two Investments

question 135

Multiple Choice

You are going to choose between two investments. Both cost $80,000, but investment A pays $35,000 a year for four years while investment B pays $30,000 a year for five years. If your required return is 13%, which should you choose?

• A) A, because the pays back sooner.
• B) A, because the IRR exceeds 13%.
• C) A, because the project has a higher IRR.
• D) B, because the IRR exceeds 13%.
• E) B, because it has a higher NPV.

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