You are asked to evaluate two competing projects (mutually exclusive) that have been proposed by your R&D division. Your first step in analyzing which project to accept will be calculating the NPV, IRR, MIRR, payback and discounted payback for the first project. Project Alpha requires an initial investment of $100,000. The project will generate a return of 60% of the money invested the first year. This will then grow at a rate of 20% for 2 years. After which, the project will come to an end. Selling the machinery a year after the project ends will generate an additional $20,000. Assume the company and all of its projects have a WACC of 12%.

1. Calculate the NPV of Project Alpha.
2. Construct the formula for IRR, you will get an answer of 51%
3. Calculate the MIRR
4. Calculate the payback
5. Calculate the discounted payback

You do a similar analysis on the second project, Project Beta. Your estimates yield an IRR=25%, MIRR = 19%, a payback of 2.21, and a discounted payback of 2.63.

1. Given this information, which project should you choose and why?
2. Suppose all of your estimates of are correct. Is there any additional information (again, itwont change any of your estimates for the two projects) that would change your decision?

Explain how this might happen?