Question: 6. Consider projects Alpha and Beta: Cash Flows ($) Project C0 C1 C2 IRR (%) Alpha 400,000 241,000 293,000 21 Beta 200,000 131,000 172,000 31

6. Consider projects Alpha and Beta:

Cash Flows ($)

Project C0 C1 C2 IRR (%)

Alpha 400,000 241,000 293,000 21 Beta 200,000 131,000 172,000 31 The opportunity cost of capital is 8%.

Suppose you can undertake Alpha or Beta, but not both. Use the IRR rule to make the choice. ( Hint: What’s the incremental investment in Alpha?)

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