ABC Ins. has the following mutually exclusive projects. Project B -$25,000 $15,000 $11,000 $20,000 Year 0 2 3 Project A -$20,000 $15,000 $10,000 $5,000 (a) Suppose the company's payback period cutoff is two years. Compute the payback period for each project. Which of these two projects should be chosen? (b) Suppose the company uses the NPV rule to rank these two projects. Compute the net present value for each project. Which project should be chosen if the discount rate is 12 percent?

3. ABC Ins. has the following mutually exclusive projects. (a) Suppose the company's payback period cutoff is two years. Compute the payback period for each project. Which of these two projects should be chosen? (b) Suppose the company uses the NPV rule to rank these two projects. Compute the net present value for each project. Which project should be chosen if the discount rate is 12 percent