You are evaluating the following mutually exclusive projects for your firm, whose cost of capital is 14 , and all dollar amounts are in millions 1 Verify the NPV and IRR of each project 2 What is your recommendation Project Required Return Life IO NCF 1 n NPV IRR Alpha 12 10 years $50 $20 $63 38 45 Beta 8 5 $50 $25 $49 82 41 04 EAA Beta $12 48 million EAA Alpha $11 15 million so Accept B and Reject A Is the answer Please explain why

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Question: You are evaluating the following mutually exclusive projects for your firm, whose cost of capital is 14%, and all dollar amounts are in millions. 1.

You are evaluating the following mutually exclusive projects for your firm, whose cost of capital is 14%, and all dollar amounts are in millions.

1. Verify the NPV and IRR of each project.

2. What is your recommendation?

Project	Required Return	Life	IO	NCF1-n	NPV	IRR
Alpha	12%	10 years	$50	$20	$63	38.45%
Beta	8%	5	$50	$25	$49.82	41.04%

EAABeta = $12.48 million > EAAAlpha = $11.15 million so

Accept B and Reject A Is the answer- Please explain why

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