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Suppose you have $10,000 to invest in one of the following projects. Project Alpha requires an initial outlay of $10,000 and yields $12,000 in two years' time. Project Beta requires an outlay of $10,000 and yields $5,750 in the next year and $5,750 the year after The cost of funds available is 5% compounded annually.

Suppose you have $10,000 to invest in one of the following projects. Project Alpha requires an initial outlay of $10,000 and yields $12,000 in two years' time. Project Beta requires an outlay of $10,000 and yields $5,750 in the next year and $5,750 the year after The cost of funds available is 5% compounded annually.

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter27: Investment, The Capital Market, And The Wealth Of Nations
Section: Chapter Questions
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Please carefully this answer this question. Its pretty difficult, I couldn't solve it. Greatly Appreciated!

 

Suppose you have $10,000 to invest in one of the following projects. Project Alpha requires an initial outlay of $10,000 and yields $12,000 in two years' time. Project Beta requires an outlay of $10,000 and yields $5,750 in the next year and $5,750 the year after The cost of funds available is 5% compounded annually. Using the above information, answer the following questions: a) Calculate the net present value for both projects. Answer to the nearest cent b) Find the internal rate of return for both projects. Answer as a percent to decimals. c) Which of these projects you would choose to invest in and why?
Transcribed Image Text:Suppose you have $10,000 to invest in one of the following projects. Project Alpha requires an initial outlay of $10,000 and yields $12,000 in two years' time. Project Beta requires an outlay of $10,000 and yields $5,750 in the next year and $5,750 the year after The cost of funds available is 5% compounded annually. Using the above information, answer the following questions: a) Calculate the net present value for both projects. Answer to the nearest cent b) Find the internal rate of return for both projects. Answer as a percent to decimals. c) Which of these projects you would choose to invest in and why?
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