ABC Plc is considering an investment between two mutually exclusive projects with the following annual cash flows:

ANNUAL CASH FLOWS

Year Project A Project B

0 $-50,000 $-80,000

1 30,000 40,000

2 30,000 40,000

3 30,000 40,000

4 30,000 40,000

5 30,000 40,000

ABC Plc requires a 16 percent rate of return on projects of this nature.

Required:

1. Compute the NPV of both projects.
2. Compute the internal rate of return on both projects.
3. Compute the profitability index of both projects.
4. Compute the non-discounted payback period on both projects.
5. Compute the discounted payback period on both projects.
6. Which of the two projects, if either, should ABC Plc accept? Why?