Use the table for the question(s)below. Consider the following two projects with cash flows in $: -Assume that projects Alpha and Beta are mutually exclusive.The correct investment decision and the best rationale for that decision is to: A)invest in project Beta since NPVBeta 0. B)invest in project Alpha since NPVBeta IRRA. D)invest in project Beta since NPVBeta NPVAlpha 0.

Question

Use the table for the question(s)below.
Consider the following two projects with cash flows in $: 
-Assume that projects Alpha and Beta are mutually exclusive.The correct investment decision and the best rationale for that decision is to:
A)invest in project Beta since NPVBeta > 0. 
B)invest in project Alpha since NPVBeta < NPVAlpha. 
C)invest in project Beta since IRRB > IRRA. 
D)invest in project Beta since NPVBeta > NPVAlpha > 0.

Quizplus · Accepted Answer

We can see from the table that NPV for project Alpha is $235 and for project Beta is $315. So, NPVBeta > NPVAlpha. Also, both have positive NPV so both are financially viable. Hence, the correct investment decision is to invest in project Beta as it has a higher NPV than project Alpha.

Use the Table for the Question(s)below