ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Suppose you have $10,000 to invest in one of the following projects.
Project Alpha requires an initial outlay of $10,000 and yields $12,000 in two years'
time.
Project Beta requires an outlay of $10,000 and yields $5,750 in the next year and
$5,750 the year after
The cost of funds available is 5% compounded annually.
Using the above information, answer the following questions:
a) Calculate the net present value for both projects. Answer to the nearest cent
b) Find the internal rate of return for both projects. Answer as a percent to 2
decimals.
c) Which of these projects you would choose to invest in and why?
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Transcribed Image Text:Suppose you have $10,000 to invest in one of the following projects. Project Alpha requires an initial outlay of $10,000 and yields $12,000 in two years' time. Project Beta requires an outlay of $10,000 and yields $5,750 in the next year and $5,750 the year after The cost of funds available is 5% compounded annually. Using the above information, answer the following questions: a) Calculate the net present value for both projects. Answer to the nearest cent b) Find the internal rate of return for both projects. Answer as a percent to 2 decimals. c) Which of these projects you would choose to invest in and why?
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Is the IRR Beta correct?

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