Question: Company ABC is considering two mutually exclusive projects: Project Alpha: Initial investment 15,000 with cash flows of 5,000 per year for 5 years. Project Beta:

Company ABC is considering two mutually exclusive projects:

  • Project Alpha: Initial investment ₹15,000 with cash flows of ₹5,000 per year for 5 years.
  • Project Beta: Initial investment ₹10,000 with cash flows of ₹3,000 per year for 5 years.

Requirements:

  1. Calculate the Payback Period for each project.
  2. Compute the Discounted Payback Period at a cost of capital of 14%.
  3. Determine the NPV of each project at 14%.
  4. Evaluate the IRR for each project.
  5. Based on NPV, which project should the company undertake?

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