Problem
Suppose you are a financial manager and you have the following information on two projects:
Project Alpha Project Beta NPV $34,670 $1,500 IRR (required rate of return is 10%) 12.4% 10.6% Payback Period 6 years 2 years
a. If the projects are mutually exclusive, is there a clear best option to which project should be undertaken? Why or why not?
b. Which option is the financial manager likely to choose? Why?
c. Under what circumstances would the other project be undertaken?
d. 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.
The response should include a reference list. One-inch margins, Using Times New Roman 12 pnt font, double-space and APA style of writing and citations.