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Project Alpha Project Beta Interest Rate = 5% Interest Rate = 5% Inflation = 1.5% Inflation = 2% Fixed Investment = $1,000,000 Fixed Investment =

Project Alpha Project Beta Interest Rate = 5% Interest Rate = 5% Inflation = 1.5% Inflation = 2% Fixed Investment = $1,000,000 Fixed Investment = $1,200,000 Annual Cash Inflow = $250,000 Annual Cash Inflow = $200,000 Avg. Annual Profit = $100,000 Avg. Annual Profit = $145,000 The Payback Period (PP) for project Alpha is [Blank-1] years The Payback Period (PP) for project Beta is [Blank-2] years For the following answers use two decimals after the comma and round if necessary. (e. g. 0.12555 will be 0.13 and not 13.00%) The Average Rate of Return (ARR) for project Alpha is [Blank-3] The Average Rate of Return (ARR) for project Beta is [Blank-4] If you were making a decision based purely on Average Rate of Return (ARR), you would select the project [Blank-5] If you were making a decision based purely on Payback Period (PP), you would select the project [Blank-6]

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