Annual cash inflows from two competing investment opportunities are given below. Each investment opportunity will require the same initial investment of $9,600. Mike Steal Company has a doubt about which investment opportunity is going to provide a higher return to the company.

Year	Investment A	Investment B
2021	$8,200	$12,000
2022	7,400	10,500
2023	7,100	9,000

Required:

1. Compute the present value of the cash inflows for each investment using a 16% discount rate.

(6 marks)

	Amount of Cash Flows		Present Value of Cash Flows
Year(s)	Investment A	Investment B	Investment A	Investment B
2021	$8,200	$12,000
2022	7,400	10,500
2023	7,100	9,000
Total

2. Compute Net Present Value. (6 marks)

	Investment A	Investment B
Present Value of Cash Flows
Initial Cost
Net Present Value (NPV)

3. Which investment opportunities should be accepted based on the NPV analysis? Why?

(3 marks)

4. What is the Payback period for Investment A and Investment B? (8 marks)
5. Which investment opportunities should be accepted based on the payback period? Why?

(2 marks)