I’m studying for my Accounting class and don’t understand how to answer this. Can you help me study?
Suppose you are a financial manager and you have the following information on two projects:
Project AlphaProject BetaNPV$34,670$1,500IRR (required rate of return is 10%)12.4%10.6%Payback Period6 years2 years
If the projects are mutually exclusive, is there a clear best option to which project should be undertaken? Why or why not?
Which option is the financial manager likely to choose? Why?
Under what circumstances would the other project be undertaken?
Identify at least two circumstance in which the other project may be undertaken, and identify any considerations with the IRR methodology compared to the NPV methodology.
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