Consider the following two investment projects: Year Project A Project B

Hints: You may find similar example in Chapter 7 of the textbook. Please

provide detailed answer showing all the calculations.

0 -150 -150

1 60 70

2 60 85

3 60 70

4 60 0

Both the projects are equally risky, and the opportunity cost of capital is 12 percent.

a. Find the NPV of both the projects.

b. If the projects are mutually exclusive which project would you choose and why? If the projects are independent projects which project(s) would you choose and why?

c. Find the IRR of both projects. ]

d. Compute Payback Period, Discounted Payback Period and Profitability Index for both the projects. Which project ranks betters based on these criteria?