Capital Budgeting Analysis

• Project Alpha:
  • Initial Investment: $50,000
  • Cash Flows:
    • Year 1: $15,000
    • Year 2: $20,000
    • Year 3: $25,000
    • Year 4: $30,000
  • Discount Rate: 10%
• Project Beta:
  • Initial Investment: $60,000
  • Cash Flows:
    • Year 1: $10,000
    • Year 2: $15,000
    • Year 3: $25,000
    • Year 4: $35,000
  • Discount Rate: 10%

Requirements:

1. Calculate the NPV for each project.
2. Determine the IRR for each project.
3. Calculate the Payback Period for each project.
4. Determine the Profitability Index (PI) for each project.
5. Provide a recommendation on which project to undertake if they are mutually exclusive.