npv

 

Suppose you are a financial manager and you have the following information on two projects:

Project AlphaProject BetaNPV$34,670$1,500IRR (required rate of return is 10%)12.4%10.6%Payback Period6 years2 years

• If the projects are mutually exclusive, is there a clear best option to which project should be undertaken? Why or why not?
• Which option is the financial manager likely to choose? Why?
• Under what circumstances would the other project be undertaken?
• Identify at least two circumstance in which the other project may be undertaken, and identify any considerations with the IRR methodology compared to the NPV methodology.
• Your document should be between 350-500 words and please add references.