Capital Budgeting (Payback Period and NPV):

27Company XYZ is evaluating two investment projects, A and B, with the following cash flows:

• Project A: Initial Investment = $60,000, Cash Flows = $25,000 per year for 4 years
• Project B: Initial Investment = $90,000, Cash Flows = $30,000 per year for 5 years

Requirements:

1. Calculate the payback period for each project.
2. Compute the net present value (NPV) for each project using a discount rate of 12%.
3. Recommend which project the company should undertake based on the payback period and NPV.