Two mutually exclusive investment opportunities require an initial investment of $100,000 and generate the following cash flows. At what cost of capital would an investor regard both opportunities as being equivalent?
Project A |
Project B |
|
Time 0 |
-100,000 |
-100,000 |
Time 1 |
50,000 |
40,000 |
Time 2 |
45,000 |
30,000 |
Time 3 |
30,000 |
60,000 |
14% |
||
18% |
||
20% |
||
24% |
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