PART 4 Capital Budgeting Comparing Investment Criteria (L01,2,3,5,7) Consider the following two mu- tually exclusive projects: Year 1 2 3 Cash Flow (A) -$364,000 46.000 68,000 68,000 458,000 Cash Flow (B) -$52,000 25,000 22,000 21.500 17,500 4 Whichever project you choose, if any, you require a return of 11 percent on your investment. a. If you apply the payback criterion, which investment will you choose? Why? b. If you apply the discounted payback criterion, which investment will you choose? Why? e. If you apply the NPV criterion, which investment will you choose? Why? d. If you apply the IRR criterion, which investment will you choose? Why? e. If you apply the profitability index criterion, which investment will you choose? Why? f. Based on your answers in (a) through (e), which project will you finally choose? Why? ness by building a new manufacturing plant. The plant has an installation cost of $13.5 million, which will be depreciated straight-line to zero over its four-year life, PART 4 Capital Budgeting 6. Calculating AAR (L04) You're trying to determine whether to expand your busir If the plant has projected net income of S1,570,000, S1,684,200, 51,716,300, and $1,097,400 over these four years, respectively, what is the project's average account ing return (AAR)? inn