Wright State University Opportunity Cost of Capital and Capital Budgeting

Read chapter 3 Opportunity Cost of Capital and Capital Budgeting from attached text book and answer problem P3-3 which is at the end of chapter

Jasper, Inc., is considering two mutually exclusive investments. Alternative A has a current outlay of $300,000 and returns $100,300 a year for five years. Alternative B has a current outlay of $150,000 and returns $55,783 a year for five years. Required:

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a. Calculate the internal rate of return for each alternative.

b. Which alternative should Jasper take if the required rate of return for similar projects in the capital market is 15 percent?

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