Part A Stark Enterprises is considering two mutually exclusive projects. The relevant cash flows for each project are shown in the table below. Project Alpha Project Beta Initial Investment $50,000 $60,000 Year Net Cash Inflows 1 $22,000 $35,000 2 $22,000 $25,000 3 $22,000 $20,000 4 $22,000 $15,000 a. Suppose the company has a cost of capital of 12%. Determine the Net Present Value (NPV) of each project. Which project is preferred and why? b. What is the discounted payback period for each project? C. why? If you were to guess the IRR for each project would it be above or below 12% and

Part A Stark Enterprises is considering two mutually exclusive projects. The relevant cash flows for each project are shown in the table below. Project Alpha Project Beta Initial Investment $50,000 $60,000 Year Net Cash Inflows 1 $22,000 $35,000 2 $22,000 $25,000 3 $22,000 $20,000 4 $22,000 $15,000 a. Suppose the company has a cost of capital of 12%. Determine the Net Present Value (NPV) of each project. Which project is preferred and why? b. What is the discounted payback period for each project? C. why? If you were to guess the IRR for each project would it be above or below 12% and

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 7P: Your division is considering two investment projects, each of which requires an up-front expenditure...

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