1. Assume a $100,000 investment and the following cash flows for two alternatives. Year 1 2 3 4 5 Investment A $40,000 $30,000 $20,000 $30,000 $20,000 Investment $40,000 $20,000 $30,000 $25,000 $15,000 a) Which of the two alternatives would you select under the payback method? b) Which of the two alternatives would you select based on the IRR method, what is the internal rate of return? c) Which of the two alternatives would you select based on the NPV method when cost of capital is 12 percent? d) Which of the two alternatives would you select under the profitability index, when cost of capital is 15 percent? 2. Aerospace Dynamics will invest $110,000 for project A and $100,000 for Project B. Both projects that will produce the following cash flows. Year Project A Project B 1 36,000 36,000 2 44,000 44,000 3 38,000 (38,000) 4 (44,000) 44,000 5 81,000 81,000 The firm will also be required to spend $10,000 for Project A and $12,000 for Project B to Close down projects end of the five years. a) Which of the two alternatives would you select under the payback method b) Calculate NPV for both project if the cost of capital 10 percent c) Calculate Profitability Index (PI) for both project. Comment: which project would you select