a.   Given the following cash flows, for the two independent projects A and B, calculate
 i.   Payback Period  
 ii.   Accounting rate of return  
 iii.   Net Present Value
 iv.   Profitability index
 And recommend acceptance or rejection of projects considering individual techniques of capital budgeting. A rate of 10 % has been selected for the NPV analysis.

 

    Project A   Project B
Initial outlay   $50,000   $100,000
Cash inflows        
Year 1   $10,000   $ 25,000
Year 2   15,000   25,000
Year 3   20,000   25,000
Year 4   25,000   25,000
Year 5   30,000   25,000
  

b.   Explain the distinctive features of capital budgeting decisions.