3)

X-treme Vitamin Company is considering two investments, both of which cost$30,000. The cash flows are as follows:

Year	Project A	Project B
1	$	32,000		$	21,000
2		15,000			14,000
3		6,000			11,000

UseAppendixBfor an approximate answer but calculate your final answer using the formula and financial calculator methods.

a-1.	Calculate the payback period for Project A and Project B.(Round your answers to 2 decimal places.)

	Payback Period
Project A	year(s)
Project B	year(s)

a-2.	Which of the two projects should be chosen based on the payback method?
	Project A Project B

b-1.	Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent.(Do not round intermediate calculations and round your final answers to 2 decimal places.)

	Net Present Value
Project A	$
Project B	$

b-2.	Which of the two projects should be chosen based on the net present value method?
	Project A Project B

c.	Should a firm normally have more confidence in the payback method or the net present value method?
	Net present value method Payback method