Giant Machinery Ltd is considering to invest in one of the two following Projects to buy a new

equipment. Each project will last 5 years and have no salvage value at the end. The company's required

rate of return for all investment projects is 9%. The cash flows of the projects are provided below.

Project 1Project 2

Cost$175,000$185,000

Future Cash Flows

Year 1

Year 2

Year 3

Year 4

Year 5

76,000

83,000

67,000

65,000

55,000

87,000

78,000

69,000

65,000

57,000

Required:

a)Identify which project should the company accept based on NPV method. (4 marks) (Note: Please

round up the result of each calculation of PV to 2 decimal places only for simplification)

b)Identify which project should the company accept based on simple pay back method if the

payback criteria is maximum 2 years. (4 marks)

c)Which project Giant Machinery should choose if two methods are in conflict. (2 marks)