Apex Semiconductor Inc. (ASI) is evaluating two proposed projects, S and L. Table 1 provides some simplified data on two projects. Both involve developing a new computer chip, but with different ways of handling the operation. Under plan S, the project would be accelarated; hence it would have high sales in Year 1. However, under S the firm's competitors would learn about the product relatively soon, and sales would decline as competitors began to produce similar chips. Therefore, S's cash flows decline over its 4-year life. Under Project L, things would be handled differently. Here, PNC would operate slowly, carefully, and securely, and customers would be locked in through long-term contracts. Thus under L, sales and cash flows would rise over time. Even so, new products would eventually replace this chip, so L would also have a 4-year life. Financial analysts have estimated ASI's weighted cost of capital (WACC) to be 8.71%.
Table 1. Cash Flows for Projects S and L
Project S		Year (t)	0	1	2	3	4
Net cash flow			($100,000)	$82,270	$30,000	$10,000	$10,000
Project L		Year (t)	0	1	2	3	4
Net cash flow			($100,000)	$10,000	$20,000	$50,000	$75,750
Questions
1. Calculate the payback period and discounted payback period of the two projects.
Project S:
		WACC	8.71%
	t		0	1	2	3	4
	CF
	Cumulative CF
	Payback			years
	Discounted CF
	Cumulative CF
	Discounted Payback			years
Project L:
	t		0	1	2	3	4
	CF
	Cumulative CF
	Payback			years
	Discounted CF
	Cumulative CF
	Discounted Payback			years
2. Find the NPV and IRR of the two projects.
	WACC	8.71%
		Project S		Project L
	NPV
	IRR
3. Which project should be accepted? Try to make a well-informed decision.