1. Please follow the directions below, in evaluating the following two 5-year projects, based on these estimated cash flows:

	Project Alpha	Project Beta
Year 0	$ (460,000)	$ (175,000)
Year 1	0	60,000
Year 2	80,000	60,000
Year 3	0	60,000
Year 4	270,000	50,000
Year 5	400,000	40,000

REQUIRED:

a. Find the payback period in years and months(i.e.,your answers should be in the form x years and y months, assuming some months are needed as well as full years) for each project.

b. Based on the payback period decision rule, which project is the better choice? Why?

c. Comment on the results of your analysis; does the decision seem correct to you? Why or why not?

d. For each of the two projects described below, please find the NPV, assuming that money will cost this company 10% p.a. And on the basis of your NPVs, decide which project should be undertaken, if only one of them can be chosen.

e. For each of the two projects above, please find the PI. And on the basis of your PIs, decide which project should be undertaken, if only one of them can be chosen.

f. Did you make the same choice in both parts d and e of this problem? Why or why not?