Question: The NPV (net present value) of Plan Alpha is $ (130,539) The NPV (net present value) of Plan Beta is $ 233,001 The IRR (internal

The NPV (net present value) of Plan Alpha is $	(130,539)

The NPV (net present value) of Plan Beta is $	233,001

The IRR (internal rate of return) of Plan Alpha is $	19.36	%.

The IRR (internal rate of return) of Plan Beta is $	21.25	%.

Which plan, if any, should the company pursue?

Based on the results above, the company should pursue

Plan Beta

because the NPV is

positive

and the IRR is

greater than

the company's required rate of return.

Requirement 2. Explain the relationship between NPV and IRR. Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 1? Why or why not?

The internal rate of return is the interest rate that makes the net present value of an investment

Thus, if an investment's net present value is positive, the internal rate of return is

the required rate of return and if the net present value is negative, the internal rate of return is

the required rate of return

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