Prepare a graph as follows label the vertical axis

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Specialized Consulting Service Company%u2019s after-tax net cash flows associated with two mutually exclusive projects, Alpha and Beta, are as follows:

  • Cash flow, EOY
  • Project 0 1 2
  • Alpha -100 125 0
  • Beta -100 50 84

a. Calculate the net present value for each project using discount rates of 0, 0.04, 0.08, 0.12, 0.15, 0.20, and 0.25.
b. Prepare a graph as follows. Label the vertical axis %u2018%u2018Net Present Value in Dollars%u2019%u2019 and the horizontal axis %u2018%u2018Discount Rate in Percent per Year.%u2019%u2019 Plot the net present value amounts calculated in part a. for project Alpha and project Beta.
c. State the decision rule for choosing between projects Alpha and Beta as a function of the firm%u2019s cost of capital.
d. What generalizations can you draw from thisexercise?

Reference no: EM13579777

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