Consider the following two mutually exclusive projects:

Year	Cash Flow (Project A)	Cash Flow (Project B)
0	-625,000,000	-480,000,000
1	65,000,000	40,000,000
2	120,000,000	82,000,000
3	183,000,000	157,000,000
4	240,000,000	201,000,000
5	240,000,000	185,000,000
6	160,000,000	120,000,000
7	95,000,000	90,000,000
8	45,000,000	40,000,000

The required return is 10% for both projects.

1. Which project will you choose if you apply the NPV criterion? Why? Show your calculations.

(4 marks)

2. Which project will you choose if you apply the payback criterion? Why? Show your calculations.

(3 marks)

3. Which project will you choose if you apply the IRR criterion? Briefly explain your answer.

(4 marks)

4. How are the decisions based on NPV and IRR criterion related?

(1 marks)

5. Based on the above answers, which project will you finally choose? Briefly explain.

(2 marks)