Two investment projects are being considered by the Gem Company. Project A, costing \(\$ 16,000\) with an estimated useful life of three years, will earn a net cash inflow of \(\$ 8,000\) per year. Project \(B\), costing \(\$ 29,000\) with an expected useful life of four years, will earn a net cash inflow of \(\$ 12,000\) per year.

{Required:}
1. Calculate the payback period (consider the time value of money, \(\mathrm{i}=10 \%\) ) for each project.
2. Calculate the internal rate of return for each project.
3. The company has the following policies for evaluating alternative projects:

(a) The payback period should not be greater than 75 percent of the estimated useful life of the project.

(b) The project with the largest internal rate of return is considered to be the most desirable.
Which project is most desirable?