Question: Case 2. (25 points) Consider the following three projects: Year Beta -100 Alpha -1000 600 400 100 -200 Gamma -500 200 250 250 100 150

Case 2. (25 points) Consider the following three projects: Year Beta

Case 2. (25 points) Consider the following three projects: Year Beta -100 Alpha -1000 600 400 100 -200 Gamma -500 200 250 250 100 150 100 50 200 0 100 100 100 -100 0 The cost of capital for the company is 12%. 1. If you apply the payback criterion, which project will you choose? Why? (5 points) 2. If you apply the NPV criterion, which project will you choose? Why? (5 points) 3. If you apply the IRR criterion, which project will you choose? Why? (5 points) 4. If you apply the profitability index criterion, which project will you choose? Why? (5 points) 5. Based on your answers in (1) through (4), which project will you finally choose? Why? (5 points)

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