Assume the firm has the discount rate of 11.2%, and is under a soft credit rationing such that it needs to choose between Project A and Project B. Project A will require an initial investment of $250,000 today at year 0 and will generate $55,000 at Year 1, $70,000 at Year 2, $60,000 at Year 3, $63,000 at Year 4, $62,000 at Year 5, and $65,000 at Year 6. Project B will require an initial investment of $500,000 today at year 0 and will generate $80,000 each year from Year 1 to Year 5, and will generate $500,000 at Year 6. Which of the following is a better investment under the Net Present Value standard:

A.) Project A

B.) Project B

C.) Neither is a good investment

D.) We do not have sufficient information to answer this question.

Which is a better investment under the Discounted Payback Period standard?

Note: this is a discounted Payback Period standard. Do discount.

A.) Project A

B.) Project B

C.) Both project will recover their investments at the same time.

D.) We do not have sufficient information to answer this question.