Use the table for the question(s) below. Consider the following two projects: -Which of the following statements is correct? A) You should invest in project Beta since NPV_Beta 0. B) You should invest in project Alpha since IRR_Alpha IRR_Beta. C) You should invest in project Alpha since NPV_Alpha 0.

Question

Use the table for the question(s) below. Consider the following two projects: -Which of the following statements is correct? A) You should invest in project Beta since NPV_Beta > 0. B) You should invest in project Alpha since IRR_Alpha > IRR_Beta. C) You should invest in project Alpha since NPV_Alpha < 0. D) You should invest in project Beta since IRR_Beta > 0.

Quizplus · Accepted Answer

A) NPV Alpha NPV = -79 + 20 / (1.15)¹ + 25 / (1.15)² + 30 / (1.15)³ + 35 / (1.15)⁴ + 40 / (1.15)⁵= 16.92 NPV Beta NPV = -80 + 25 / (1.16)¹ + 25 / (1.16)² + 25 / (1.16)³ + 25 / (1.16)⁴ + 25 / (1.16)⁵ + 25 / (1.16)⁶ + 25 / (1.16)⁷= 20.96 IRR Alpha CF₀ = -79 CF₁ = 20 CF₂ = 25 CF₃ = 30 CF₄ = 35 CF₅ = 40 Compute IRR = 22.68 IRR Beta PV = -80 PMT = 25 FV = 0 N = 7 Compute I = 24.52

Use the Table for the Question(s) Below