One factory identified three mutually exclusive investment proposals. The life of the three is estimated at 5 years with a negligible residual value, and with a MARR equal to 9% per year.proposalsInvestment ($ million)Annual Net Income($ million)MARR (%)A151,39,43A271,911,13A38,52,311,0Which investment should be selected according to the following methods:a) IRR-internal rate of return.b) Net Present Value.

IRR (Internal Rate of Return): It is the rate at which the project yield zero net present value.…

Answered: Which investment should be selected…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 2P

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One factory identified three mutually exclusive investment proposals. The life of the three is estimated at 5 years with a negligible residual value, and with a MARR equal to 9% per year.

proposals	Investment ($ million)	Annual Net Income($ million)	MARR (%)
A1	5	1,3	9,43
A2	7	1,9	11,13
A3	8,5	2,3	11,0

Which investment should be selected according to the following methods:

a) IRR-internal rate of return.

b) Net Present Value.

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