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Consider the following two mutually exclusive projects: Year Cash flow (A) Cash flow (B) 0 -$245000 -$53000 1 34000 31900 2 49000 21800 3

Consider the following two mutually exclusive projects: Year Cash flow (A) Cash flow (B) 0 -$245000 -$53000 1 34000 31900 2 49000 21800 3 51000 17300 325000 16200 Whichever project you choose, if any, you require a return of 13% on your investment. (a) If you apply the payback period criterion, which investment will you choose? Why? (b) If you apply the NPV criterion, which investment will you choose? Why?

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