2. Your firm has estimated the following cash flows for two mutually exclusive projects. The firm's required rate of return is 10%. The firm uses 3 years as the cutoff for payback period method.

Year Project A Cash Flow Project B Cash Flow 0 -$185,000 -$410,000 1 55,000 120,000 2 55,000 120,000 3 55,000 110,000 4 45,000 110,000 5 45,000 90,000 6 45,000 60,000 1. What is the Payback Period of Projects A and B? 2. Which project would you accept on the basis of payback period? 3. What is the NPV of projects A and B? 4. Which project would you accept on the basis of NPV? 5. What is the PI of projects A and B? 6. Which project would you accept on the basis of PI? 7. What is the IRR of projects A and B? 8. Which project would you accept on the basis of IRR? 9. Is there a conflict between the methods? 10. Which project(s) would you accept and why? 11. What would be your answer to 10 above if the projects were independent?