3. Consider the following two mutually exclusive projects: Annual cash flows: Year 0 Year 1 Year 2 Year 3 Year 4 Required return $ SSSS $ $ $ $ A (430,000) 58,000 80,000 85,000 570,000 SSSS $ $ $ $ $ B (60,000) 30,000 28,000 26,000 19,000 12% Whichever project you choose, if any, you require a return of 12 percent on your investment. a. If you apply the payback criterion, which investment will you choose? Why? b. If you apply the NPV criterion, which investment will you choose? Why? c. If you apply the profitability index criterion, which investment will you choose? Why? d. Based on your answers in (a) through (c), which project will you finally choose? Why? (a. 4%, b. 5%, c. 5%, d. 1%, all: 15%)

3. Consider the following two mutually exclusive projects: Whichever project you choose, if any, you require a retum of 12 percent on your investment. a. If you apply the payback criterion, which investment will you choose? Why? b. If you apply the NPV criterion, which investment will you choose? Why? c. If you apply the profitability index criterion, which investment will you choose? Why? d. Based on your answers in (a) through (c), which project will you finally choose? Why? (a. 4%,b 5%, c. 5%, d. 1%, all: 15% )