Choosing Between Two Projects Based on NPV

A company is evaluating two mutually exclusive projects, Project Alpha and Project Beta. Project Alpha has an initial investment of $5 million and is expected to generate cash flows of $1.5 million at the end of each year for the next 5 years. Project Beta requires an initial investment of $4 million and is expected to generate cash inflows of $1.2 million per year for the same 5-year period. The company has a cost of capital of 10%.

Both projects are expected to produce similar advantages in terms of strategic alignment with the company’s goals. To make a capital budgeting decision, the company will be employing the Net Present Value (NPV) method. Which project should the company pursue based on the NPV analysis?