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You work for the 3T company, which expects to earn at least 18 percent on its investments. You have to choose between two similar projects

You work for the 3T company, which expects to earn at least 18 percent on its investments. You have to choose between two similar projects Omega or Alpha. Below is the cash information for each project. Your analysts predict that inflation rate will be a stable with 3 percent over the next 7 years. Which of the two projects would you fund if the decision is based only on financial information? Give reasons for you answer.

Omega

Alpha

Year 0

Inflow (k)

Outflow (K)

Netflow (K)

Year

Inflow (k)

Outflow (k)

Netflow (k)

Y0

0

225,00

-225,000

Y0

0

300,000

-300,000

Y1

0

190,000

-190,000

Y1

50,000

100,000

-50,000

Y2

150,000

0

150,000

Y2

150,000

0

150,000

Y3

220,000

30,000

190,000

Y3

250,000

50,000

200,000

Y4

215,000

0

215,000

Y4

250,000

0

250,000

Y5

205,000

30,000

175,000

Y5

200,000

50,000

150,000

Y6

197,000

0

197,000

Y6

180,000

0

180,000

Y7

100,000

30,000

70,000

Y7

120,000

30,000

90,000

Total

1,087,000

505,000

582,000

Total

1,200,000

530,000

670,000

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