It's a financial market where people can buy or sell long-term debt or equity-backed securities

The example of capital markets are : New York stock Exchange, American stock exchange, London stock exchange, NASDAQ, Etc

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3 years ago

You are considering two independent projects. Project A has an initial cost of $125,000 and cash inflows of $46,000, $79,000, an

vitfil [10]

Answer:

Accept Project A and reject Project B

Explanation:

See the images to get the answer.

Decision: Required rate of return = 16% = Cost of capital.

If Internal rate of return (IRR) > the cost of capital = Accept the project.

If Internal rate of return (IRR) < the cost of capital = Reject the project.

From the basis of the formula, we can accept the project A because the IRR of Project A (19%) is higher than the cost of capital (16%). On the other hand, we can reject the project B because the IRR of Project B (14%) is smaller than the cost of capital (14%).