Neil Corporation has two projects under consideration. The cash flows for each of them are shown in the following table. The firm has a 15% cost of capital.

a. Calculate each projects payback period. Which project is preferred according to this method? b. Calculate each projects net present value (NPV). Which project is preferred according to this method? c. Comment on your findings in parts a and b, and recommend the better project. Explain your recommendation.

Project B $38000 Initial Cash Outflow Year 1 2 3 4 5 Project A $38000 Cash inflows $12000 12000 12000 12000 12000 2 $20000 18000 12000 7000 3000