ABC Corporation is evaluating two mutually exclusive projects, Project Alpha and Project Beta, both requiring...
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Accounting
ABC Corporation is evaluating two mutually exclusive projects, Project Alpha and Project Beta, both requiring an initial investment of USD 50,000. The expected after-tax cash inflows for each project are as follows:
Year | Cash Flows (Project Alpha) | Cash Flows (Project Beta) |
Initial Investment | (50,000) | (50,000) |
1 | 15,000 | 10,000 |
2 | 15,000 | 20,000 |
3 | 10,000 | 15,000 |
4 | 10,000 | 20,000 |
a. Calculate the payback period for Project Alpha and Project Beta.
b. Which project should the company invest in and why? Use the Net Present Value (NPV) method assuming a discount rate of 6%.
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