Question $4(20$ marks$)$

Summit Enterprises is assessing two potential investment ventures, Project Alpha and Project Beta. Both projects are anticipated to have an operational duration of $5$ years.

Project Alpha involves an upfront investment of $800$ million and is projected to yield annual cash inflows $300$ million throughout its life. Project Beta requires an initial investment of $6,000$ million and is expected to produce annual cash inflows of $2,000$ million over its duration. The company considers both projects to carry a similar risk profile, and the required rate of return for investments of this nature is $10\%.$

Required:

a$)$ Calculate the Net Present Value $($NPV$)$ and the Internal Rate of Return $($IRR$)$ for both Project Alpha and Project Beta. $(12$ marks$)$

b$)$ If the projects are mutually exclusive $($only one can be chosen$),$ which project should Summit Enterprises select based on the NPV criterion? $(2$ marks$)$

c$)$ If the projects are mutually exclusive, which project should Summit Enterprises select based on the IRR criterion? $(2$ marks$)$

d$)$ Does a conflict exist between the recommendations derived from the NPV and IRR criteria for Summit Enterprises' capital budgeting decision? Explain the potential reason$($s$)$ for any conflict and state which criterion should generally be preferred. $(4$ marks$)$