Suppose you are a financial manager and you have the following information on two projects:
|Project Alpha||Project Beta|
|IRR (required rate of return is 10%)||12.4%||10.6%|
|Payback Period||6 years||2 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.
- Your document should be between 350-500 words and please add references.