1.Net present value, payback, internal rate of return, and accounting rate of return Consider the following two mutually exclusive projects, each of which requires an initial investment of $100,000 and has no salvage value. The organization, which has a cost of capital of 15%, must choose one or the other.

Cash Inflows (End of Year)

Year	Project A	Project B
1	$30,000	$0
2	30.000	20,000
3	30,000	20,000
4	30,000	50,000
5	30,000	90,000

Compute the payback period of these projects. Using the payback criterion, which project is more desirable?

Compute the net present value of these two projects. Using the net present value criterion, which project is more desirable?

What do you think about the idea of using the payback period to adjust for risk?

How do you think conventional capital budgeting adjusts for a projects risk?

Compute the internal rate of return for each project

Assuming the straight-line depreciation is used to compute income, compute the accounting rate of return for these two projects

What do you think of accounting rate of return criterion?