Provide your recommendation on which project to accept and why. This will be your conclusion. Be sure to discuss how the IRR on each project compares to the Required Rate of Return as a hurdle rate. Explain why it makes sense for the CEO to choose the project you are recommending. Are there any other considerations you should point out?

Project 1:

Southern has been approached by Nat Gas company to invest in a natural gas field in East Texas. The investment will require that Southern Financial invest $1,000,000. There is no reason to believe that there is not oil on the property; however, Nat Gas needs the $1,000,000 investment to begin drilling for the oil. NPV: $181,040.37 Internal Rate of return: 13.10% Required rate of return (capm): 11%

Project 2: Southern Financial has been approached by Motion Streamers Pictures to invest $1,000,000 to finance the production of a movie. The movie has broad appeal and is expected to be a hit at the box office NPV: $176,088.35 Internal Rate of Return: 12.72% Required rate of return (capm): 9.2%