1) Bill Williams has the opportunity to invest in project A that costs $7,600 today and promises to pay $2,300, $2,500, $2,500, $1,900 and $1,700 over the next 5 years. Or, Bill can invest $7,600 in project B that promises to pay $1,600, $1,600, $1,600, $3,400 and $4,000 over the next 5 years.(Hint: For mixed stream cash inflows, calculate cumulative cash inflows on a year-to-year basis until the initial investment is recovered.)

a.How long will it take for Bill to recoup his initial investment in project A?

b.How long will it take for Bill to recoup his initial investment in project B?

c.Using the payback period, which project should Bill choose?

d.Do you see any problems with his choice?

2)Calculate the net present value (NPV) for a 10-year project with an initial investment of $20,000 and a cash inflow of $6,000 per year. The cost of capital is 13%. Comment on the acceptability of the project.