Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow(B)

0 -$325,000 -$30,000

1 $43,000 $15,800

2 $51,000 $13,100

3 $69,000 $12,700

4 $480,000 $9,700

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

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

B. If you apply the NPV criterion, which invesment will you choose? Why?

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

D. If you apply the profitability index criterion, which investment will you choose ? Why?

E. Based on your answers in (a) through (d), whcih project will you finally choose? Why?