###Question 4###

DEF Corporation is considering two different investment opportunities, Project Alpha and Project Beta. The following are the expected net cash flows for each project:

Projected Net Cash Flows (in thousands of dollars)

Year 0:

• Project Alpha: $(200)$
• Project Beta: $(250)$

Year 1:

• Project Alpha: $50$
• Project Beta: $70$

Year 2:

• Project Alpha: $60$
• Project Beta: $90$

Year 3:

• Project Alpha: $70$
• Project Beta: $110$

Year 4:

• Project Alpha: $80$
• Project Beta: $130$

Year 5:

• Project Alpha: $90$
• Project Beta: $150$

Requirements:

1. Calculate the Net Present Value (NPV) for each project using a discount rate of $9%$.
2. Determine the Internal Rate of Return (IRR) for each project.
3. Compute the Discounted Payback Period for each project.
4. Evaluate the risk-adjusted return for each project if the risk premium is $3%$ above the discount rate.
5. Recommend which project should be undertaken based on your calculations.