You are considering the following two mutually exclusive investment opportunities. If your cost of capital is 12%, which is better. Explain your reasoning and support numerically. Capital is not rationed. Opportunity A would cost $1000 and return $400 per year for 4 years. Opportunity B would cost $2000 and would return $1000 per year for 3 years.

You are considering the following two mutually exclusive investment opportunities. If your cost of capital is 12%, which is better. Explain your reasoning and support numerically. Capital is not rationed. Opportunity A would cost $1000 and return $400 per year for 4 years. Opportunity B would cost $2000 and would return $1000 per year for 3 years.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 7P: Your division is considering two investment projects, each of which requires an up-front expenditure...

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