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Atlas Manufacturing is considering two new projects with the following cash flows. The required rate of return is 11%.
Project Alpha:
- Initial Investment: $(180,000)
- Year 1: $60,000
- Year 2: $65,000
- Year 3: $70,000
- Year 4: $75,000
Project Beta:
- Initial Investment: $(190,000)
- Year 1: $55,000
- Year 2: $60,000
- Year 3: $65,000
- Year 4: $80,000
a. Compute the payback period for each project. Based on the payback period, which project is preferred?
b. Compute the net present value (NPV) for each project. Based on NPV, which project is preferred?
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