You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project. Neither project has any salvage value.
Based upon the internal rate of return (IRR) and the information provided in the problem, you should:
Definitions:
Return on Investment
A metric for assessing the effectiveness or gains of an investment, determined by dividing the net earnings by the investment's expense.
Minimum Return on Investment
The least amount of profit expected from an investment, below which an investment is not considered acceptable.
Investment Turnover
A measure of a company's ability to generate sales from its investment in assets, typically used to assess the efficiency of investment usage.
Profit Margin
A ratio of profitability calculated as net income divided by revenue, showing the percentage of each dollar of revenue that results in net income.
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