Capital Budgeting For the following two projects, determine the 1. Payback Period 2. Discounted Payback 3. Net Present Value 4. Profitability Index (Benefit-Cost Ratio) 5. Internal Rate of Return 6. Modified Internal Rate of Return Project A Project B Year Net Income Cash Flow Net Income Cash Flow 0 (15,000) (19,000) 1 5,000 6,000 3,000 4,000 2 5,000 6,000 5,000 6,000 3 5000 6,000 7,000 8,000 4 5,000 6,000 11,000 12,000 Risk Index 1.80 .60 The firms cost of capital ko is 15% and the risk free rate Rf is 10%. The firm assesses risk and assigns a risk index to determine a risk adjusted discount rate. An index of 1.0 would be assigned to an average risk project. To determine risk adjusted rates the firm uses the following equation: Risk Adjusted Rate (RADR) = Rf + [Risk Index (ko Rf) Task: Rank the projects in accordance with each method of analysis..

	Project A			Project B
Year		Net Income	Cash Flow		Net Income	Cash Flow
0			(15,000)			(19,000)
1		5,000	6,000		3,000	4,000
2		5,000	6,000		5,000	6,000
3		5000	6,000		7,000	8,000
4		5,000	6,000		11,000	12,000
Risk Index	1.80			.60