1. ( Comparing Capital Budgeting Techniques)

Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)

0 -$344,000 -$49,000

1 51,000 24,600

2 71,000 22,600

3 71,000 20,100

4 446,000 15,200

Whichever project you choose, if any, you require a return of 15 percent on your investment.

1. What is the payback period for each project?

2. If you apply the payback criterion, which investment will you choose?

3. What is the NPV for each project

4. If you apply the NPV criterion, which investment will you choose?

5. What is the IRR for each project?

6. If you apply the IRR criterion, which investment will you choose?

7. Based on your answers in (a) through (f), which project will you finally choose?