Drillem Oil and Gas Limited is considering two separate projects Golf and Hotel.The cash flow

projections for each year are as follows:

Years01 2345

Project Golf$100,000 10,000 10,000 20,000 30,000200,000

Years01 2345

Project Hotel$40,000 20,000 20,000 20,000 20,00020,000

The required return is 20% for both projects.

a)Calculate the payback periods. Which project would you choose if you apply the

payback period criterion?

(a)Calculate the net present values. Which project would you choose if using the net presentvalue (NPV) criterion?

(b)If the internal rate of return of project Golf is 30% and project B is 45%, which project wouldyou choose using the IRR criterion?Why?

(c) Based on your answers for (a) through to (c), which project would you finally choose? Why?