Question
A firm is evaluating two investment projects, Alpha and Beta. Project Alpha requires an initial investment of $1,000 and is expected to generate $300 annually
A firm is evaluating two investment projects, Alpha and Beta. Project Alpha requires an initial investment of $1,000 and is expected to generate $300 annually for 5 years. Project Beta requires a $1,200 investment with expected cash flows of $400 annually for 4 years. The cost of capital is 12%.
- Calculate the NPV for each project.
- Determine the IRR for each project.
- Based on NPV and IRR, which project should be undertaken?
- Assess the risk factors associated with each project.
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Managerial Accounting
Authors: Stacey Whitecotton, Robert Libby, Fred Phillips
2nd edition
9780077493677, 78025516, 77493672, 9780077826482, 978-0078025518
