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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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