Given the cash flows of Projects A and B and a 9% cost of capital, compute NPV, IRR, Profitability Index, and Payback Period for both projects respectively. Decide which project(s) to invest if

1) A and B are independent

2) There is a shortage of funds (capital rationing)

3) A and B are mutually exclusive

Cost of capital 9% Difference in Year 0 Project A Project B Cash Flow A-B Cumulative Cash Flow A Cumulative Cash Flow B $5,000 $5,000 $1,200 $800 $2,000 $2,000 $2,000 $4,000 $1,000 $700 $700 $500 4 NPV IRR Profitability index Payback period in years Crossover IRR Payback period No. of years before first positive cumulative cash flow+(absolute value of last negative cumulative cash flow/cash flow in the year of first positive cumulative cash flow