Given the cash flows in the table below for mutually exclusive projects Alpha and Beta, which project do you recommend if using a cost of capital of 10% and why?
| YEAR | ALPHA | BETA |
| 0 | -175,000 | -82,500 |
| 1 | 45,000 | 30,000 |
| 2 | 60,000 | 12,000 |
| 3 | 85,000 | 40,000 |
| 4 | 82,000 | 70,000 |
| 5 | 92,000 | 92,000 |
a.
The crossover rate is the same at the cost of the capital so either projects can be chosen.
b.
Project Beta as it has greater IRR than project Alpha and the cost of capital is to the left of the crossover rate.
c.
Project Alpha as it has lower IRR than project Beta and the cost of capital is to the left of the crossover rate.
d.
Project Alpha as it has greater NPV than project Beta and the cost of capital is to the right of the crossover rate.
