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Andile asks your opinion about an investment. She has to choose between two investments. The profitability index (PI), net present value (NPV) and internal rate of return (IRR) of the two investments are as follows:
Criteria | Investment A | Investment B |
NPV | -R70 000 | -R30 000 |
PI | 0,78 | 0,51 |
IRR | 12,00% | 22,00% |
Which investment/s should Andile choose, taking all the above criteria into consideration, if the cost of capital is equal to 16% per year?