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 2 decimals. c) Which of these projects you would choose to invest in and why?
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 2 decimals. c) Which of these projects you would choose to invest in and why?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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
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 $1,000 and yields say in the 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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