Compare the two Mutually Exclusive Projects Below using Internal Rate of Return, Net Present Value and Payback as Criteria for Decision Making: Use three potential WACC:

Exhibit 1:

Expected Cash Flows

Year Project L Project S

0 -$500 -$20,000

1 300 2,000

2 600 4,000

3 900 5,000

4 1,000 7,000

5 200 12,000

1. What is the payback period for each Project?
2. Which project would you ultimately choose and why (justify your answer)?
3. What are the advantages disadvantages of Payback as illustrated in this problem?