A hotel manager wishes to choose between two alternative investments giving the following annual net cash inflows over a five-year period:

Year Alternative 1 Alternative 2

1 $19,000 $52,000

2 $24,500 $46,000

3 $38,000 $38,000

4 $45,000 $25,000

5 $35,000 $22,000

The amount of investment under either alternative will be $140,000.

A) Using the payback period method, in which year, under both alternatives, will she have recovered the initial investment (3 points)

B) Using NPV at 10 percent, would either alternative be a good investment? (5 points)

C) In the given situation, will the IRR be higher or lower than 10% (2 points)?