A company is evaluating two independent expansion projects, Project X and Project Y. Project X requires an initial investment of $20,000, while Project Y requires $18,000.

Yearly Cash Flows

• Year 1: Project X - $6,000; Project Y - $9,000
• Year 2: Project X - $7,500; Project Y - $6,500
• Year 3: Project X - $8,000; Project Y - $5,000
• Year 4: Project X - $5,000; Project Y - $4,000

Requirements: (a) Calculate the NPV for each project using a discount rate of 12%. (b) State whether each project should be accepted or rejected. (c) Calculate the payback period for each project. (d) If the company's required payback period is 3 years, which projects meet this criterion? (e) Discuss the benefits and limitations of using the payback period as a decision tool compared to NPV.