Consider the following two mutually exclusive projects:

(a) At an interest rate of 25%, which project would you recommend choosing?
(b) Compute the area of negative project balance, discounted payback period, and area of positive project balance for each project. Which project is exposed to a higher risk of loss if either project terminates at the end of year 2?

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Net Cash Flow End of Year Project A Project B -$1,000 -$1,000 $912 $284 $684 $568 $456 $852 3 $228 $1,136 4