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Alpha Corp. is evaluating two investment opportunities. Both projects require an initial investment of USD 100,000. The cash flows are as follows: Year Cash Flows
Alpha Corp. is evaluating two investment opportunities. Both projects require an initial investment of USD 100,000. The cash flows are as follows:
Year | Cash Flows (Project X) | Cash Flows (Project Y) |
Initial Investment | (100,000) | (100,000) |
1 | 30,000 | 20,000 |
2 | 40,000 | 30,000 |
3 | 50,000 | 50,000 |
4 | 10,000 | 40,000 |
Requirements: a. Compute the payback period for each project. b. Calculate the NPV of each project if the discount rate is 10%. c. Determine the Internal Rate of Return (IRR) for both projects and decide which project should be selected based on IRR.
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