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5. Comparing Investment Criteria. Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$235,000 29,000 45,000 51,000 325,000 -$47,000 28,700

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5. Comparing Investment Criteria. Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$235,000 29,000 45,000 51,000 325,000 -$47,000 28,700 19,900 17,300 16,200 Whichever project you choose, if any, you require a return of 13 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 IRR criterion, which investment will you choose? Why?! d. If you apply the profitability index criterion, which investment will you choose? Why? e. Based on your answers in parts (a) through (d), which project will you finally choose? Why

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