1. Consider the following three projects for Ralco Co. This company is in pharmaceutical industry. It currently sells several drugs, including pain reliever and cough medicine. Project A is considered the safest project of these three, while Project C is the riskiest one. There are three discount rates for the capital budgeting; 8 percent for Project A, 13 percent for Project B, and 17 percent for Project C.

Period Project A Project B Project C

T=0 ($10,000) ($12,000) ($17,000)

T=1 $2,000 $2,900 $1,900

T=2 $1,900 $1,900 $1,900

T=3 $1,900 $1,900 $1,900

T=4 $2,500 $1,900 $1,900

T=5 $2,500 $2,900 $1,900

T=6 $1,800 $2,900 $3,900

T=7 $1,800 $2,900 $3,900

T=8 $1,800 $3,900 $3,900

T=9 $1,800 $4,900 $6,900

1. If you have to choose only one project under the Payback Period, which project should be chosen and explain WHY? (4 points)

2. When you have only $20,000 to support the above projects, which project (or projects) should be chosen under the Net Present Value (NPV) and explain WHY? (4 points)