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Mr. Oriento of Zed Ltd. Has to make a choice between two mutually exclusive investments:                    ...

  1. Mr. Oriento of Zed Ltd. Has to make a choice between two mutually exclusive investments:        

           

Cash flows (Shs. ‘000’)

T0

T1

T2

IRR

Alpha

-400

250

300

23

Omega

200

140

179

36

The opportunity cost of capital is 9% per annum. Mr. Oriento wants to invest in Omega which has the higher IRR.

Do you agree with Mr. Oriento’s choice?   Show appropriate computations. (5 marks

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

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