A firm is considering a future investment. Describe which types of cashflows the firm should or should not

include in its investment decisions and why.

b$)$ If a firm is considering two investments that would be expected to have cashflows that occur annually as

detailed below evaluate the investments using NPV$,$ payback, discounted payback and PI$,$ assuming a discount

rate of $8\%.$ Which project should the firm choose and why? If they could invest in both should they?

Project A Project B

Now $-2,000,000-2,000,000$

$1$ year $1,000,00050,000$

$2$ years $1,000,00050,000$

$3$ years $200,0001,000,000$

$4$ years $200,0001,500,000$

c$)$ How would the company decide on what discount rate to use for these calculations?