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Simmons Investment Group (SIG) used Excel to determine the net present value, the present value...

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Accounting

Simmons Investment Group (SIG) used Excel to determine the net present value, the present value index, and the internal rate of return of two investment alternatives. A summary of the results is shown below:

Alternative 1 Alternative 2
Cost of the investment $ 426,000 Cost of the Investment $ 311,000
Net Present Value (NPV) $ 11,120 Net Present Value (NPV) $ 9,450
Present Value Index 1.27 Present Value Index (NPV) 1.32
Internal Rate of Return (IRR) 10% Internal Rate of Return (IRR) 11%

SIG has $430,000 to invest. Assuming there are no other investment opportunities available, SIG should

a. invest in Alternative 1 because it has a higher net present value.

b. invest in Alternative 2 because it has a higher internal rate of return.

c. invest in Alternative 1 because the cost of the investment is higher.

d. invest in Alternative 2 because the cost of the investment is lower.

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