Use the table for the question(s)below. Consider the following two projects: -Assume that projects Alpha and Beta are mutually exclusive.The correct investment decision and the best rational for that decision is to: A)invest in project Beta since NPV_Beta 0. B)invest in project Alpha since NPV_Beta IRR_A. D)invest in project Beta since NPV_Beta NPV_Alpha 0.

Question

Use the table for the question(s)below. Consider the following two projects: -Assume that projects Alpha and Beta are mutually exclusive.The correct investment decision and the best rational for that decision is to: A)invest in project Beta since NPV_Beta > 0. B)invest in project Alpha since NPV_Beta < NPV_Alpha. C)invest in project Beta since IRR_B > IRR_A. D)invest in project Beta since NPV_Beta > NPV_Alpha> 0.

Quizplus · Accepted Answer

D)NPV Alpha NPV = -79 + 20/(1.15)¹ + 25/(1.15)² + 30/(1.15)³ + 35/(1.15)⁴ + 40/(1.15)⁵= 16.92 NPV Beta NPV = -80 + 25/(1.16)¹ + 25/(1.16)² + 25/(1.16)³ + 25/(1.16)⁴ + 25/(1.16)⁵ + 50/(1.16)⁶ + 25/(1.16)⁷= 20.96 IRR Alpha CF₀ = -79 CF₁ = 20 CF₂ = 25 CF₃ = 30 CF₄ = 35 CF₅ = 40 Compute IRR = 22.68 IRR Beta PV = -80 PMT = 25 FV = 0 N = 7 Compute I = 24.52

Use the Table for the Question(s)below