ABC Company is considering two alternative investment projects. The following information is provided:

Project A:

• Initial investment: $100,000
• Annual net cash inflows for 4 years: $35,000

Project B:

• Initial investment: $200,000
• Annual net cash inflows for 7 years: $40,000

The required rate of return for both projects is 10%.

a) Calculate the net present value (NPV) of each project and advise the company on which project it should undertake.

b) What is the payback period for each project?