opose you have $10,000 to invest in one of the following projects. ject Alpha requires an initial outlay of $10,000 and yields $12,000 in two y e. ject Beta requires an outlay of $10,000 and yields $5,750 in the next year 750 the year after e cost of funds available is 5% compounded annually. ng the above information answer the following questions:
opose you have $10,000 to invest in one of the following projects. ject Alpha requires an initial outlay of $10,000 and yields $12,000 in two y e. ject Beta requires an outlay of $10,000 and yields $5,750 in the next year 750 the year after e cost of funds available is 5% compounded annually. ng the above information answer the following questions:
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 $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 2
decimals.
c) Which of these projects you would choose to invest in and why?
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