Case ID: UV6116
Solution ID: 932

T Rowe Price Associates Case Solution

Case Solution

Peter Gordon, manager of the $1.6 billion purchase of municipal investments at Price, just received telephone calls in the sales reps of two investment banks, each offering attractive possibilities for that reinvestment of $50 million which will shortly become available. He might choose either although not each of the offers. The case may be used to evaluate the items in a "tombstone," to strengthen NPV and IRR concepts, to witness the inappropriateness of utilizing IRR like a selection qualifying criterion among mutually exclusive projects, and also to stress the reinvestment assumption of IRR.

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