Assume that you are the CFO at Lake County Hospital. The CEO has asked you to analyze two proposed capital investments of average risk: Project A and Project B. Each project requires a net investment outlay of $10,000, and the corporate cost of capital is 12 percent. The project's expected net cash flows are as follows: Year Project A Project B 0 -$10,000 -$10,000 1 $6,500 $3,000 2 $3,000 $3,000 3 $3,000 $3,000 4 $1,000 $3,500

a. Calculate each project's payback period, net present value (NPV), and internal rate of return (IRR).

b. Which project (or projects) is financially acceptable? Explain your answer.

c. Project B has been determined to be of below-average risk, which would reduce the cost of capital for that project by 3%. Does that change the acceptability of Project B? Please explain.

d. If these projects are mutually exclusive, would Project A or the below-risk Project B be chosen