AirPay company is deciding to invest between projects A and B. They hire you to evaluate the company. They give you the following information about the projects:

Assume that net working capital is 25% of the change in sales incurred at the beginning of the year, a tax rate of 20%. Assume that both projects are fully depreciated with the straight line method after four years, and both have a salvage value of 1% of the cost of investment. Both projects have a required rate of return of 10%. a. Calculate the payback period, discounted payback period, NPV, EVA, IRR and PI for both projects. b. Compare the evaluation measures of the last section. Which project is a better choice?

Year 1 Year 2 Year 3 Year 4 Year 0 6,000 Project A Initial Investment Cost Revenue Cost 20,000 6,000 15,000 4,000 30,000 25,000 1,000 18,000 Year 1 Year 2 Year 0 3,000 Year 3 Year 4 Project B Initial Investment Cost Revenue Cost 10,000 8,000 12,000 7,000 40,000 18,000 1,000 18,000