4-Capital Budgeting Decisions (14 marks) a) Bloom Inc. has to decide which of two projects to invest in. The details on the projects are as follows: Project A Project B Cost of equipment $150,000 $180,000 Working capital investment required $30,000 $- Annual net cash inflows $50,000 $48,000 Salvage value of equipment in six years $6,000 $- Life of the project 6 years 6 years Project A's working capital will be released for investment elsewhere at the end of six years. The company's required rate of return is 12%. Required Which project would you recommend that the company accept? Show all computations using the net present value. Prepare separate computations for each project using the format below (9.5 marks) Project A Item 4 5 6 57 58 39 70 Amount of Present Value of Year(s) Cash Flow Cash Flow . Project B Item -2 33 84 85 86 87 188 189 190 Amount of Year(s) Cash Flow Present Value of Cash Flow b) The management of Stainless Ltd. is considering an investment with the following cash flows: Investment Cash Inflow Year 1 $50,000 2 $30,000 3 B 4 4 5 06 37 08 09 569899 10 210 $9,500 $12,000 $13,000 $13,500 $13,500 $15,000 $17,000 $18,000 $19,000 $20,000 211 Required 212 Determine the payback period of the investment (4.5 marks). 213 214 215