1. (50 points) ABC Corp. has identified the following cash flows for projects:

Problem-solving Questions (50 points): Provide all the necessary equations and steps.

1. (50 points) ABC Corp. has identified the following cash flows for projects:

Year	Project(A)	Project (B)
0	-$30,000	-$25,000
1	10,000	8,000
2	11,000	8,000
3	12,000	8,000
4	13,000	8,000

The required rate of return is 10%. The two projects are INDEPENDENT and are depreciated through a straight-line method.

1. (6 points) What is the regular payback period for each of the projects? If the target payback period is 3 years, which projects would you choose? Why?

2. (6 points) What is the discounted payback period for each of the projects? If the target payback period is 2 years, which projects would you choose? Why?

3. (6 points) Assuming that the projected cash flows from year 1 to 4 are net income and the time 0 cash flow is the initial investment, find the AAR for EACH of the projects? If the target AAR is 20%, which project(s) would you accept? Explain why.

4. (6 points) What is the IRR for EACH of the projects? Which project(s) would you accept? Explain why. Dont forget to provide equations for IRR.

5. (6 points) What is the NPV for EACH of the projects? Which project(s) would you accept? Explain why. Dont forget to provide equations for NPV.

6. (6 points) What is the profitability index (PI) for EACH of the projects? Which project(s) would you accept? Explain why. Dont forget to provide equations for PI.

7. (6 points) Find the cross over rate. Dont forget to provide equations.

8. (8 points) Sketch the NPV profile. You need to mark 5 different points on the graph.

The required rate of return is 10%. The two projects are INDEPENDENT and are depreciated through a straight-line method.