Project 1: launching a new product of hearing aids. Your supplier offers you two options that have different cash outlay and generate different revenue but same useful life of 5 years. The table below shows the estimated data available to the companys Management:

3.1. Capital Budgeting Decision making.

	OPTION A	OPTION B
Initial investment	1205000	1315000
Annual
Year 1	290000	315000
Year 2	320000	345000
Year 3	360000	356000
Year 4	375000	402000
Year 5	480000	540000

You are required to write a short report to the companys Management:

1. To select a relevant method among five investment criteria of Net Present Value (NPV), Equivalent Annual Cost (EAC), profitability Index (PI), Internal Rate of Return (IRR), Simple Payback Period, and Discounted Payback Period for each project, given the market required rate of return for all project is 9.5% and the companys benchmark of payback is maximum 3 years. Your recommendation must include your justification on why you choose the specific method based on its pros and cons compared to other methods. (Note: you cannot use the same method for both projects) (2 marks)

You are required to write a short report to the companys Management: 1) To select a relevant method among five investment criteria of Net Present Value (NPV), Equivalent Annual Cost (EAC), profitability Index (PI), Internal Rate of Return (IRR), Simple Payback Period, and Discounted Payback Period for each project, given the market required rate of return for all project is 9.5% and the companys benchmark of payback is maximum 3 years. Your recommendation must include your justification on why you choose the specific method based on its pros and cons compared to other methods. 2) To perform the selected method and present the outcome of your project evaluation and recommend the option A or B should the company choose for each project. Your justification must include calculation steps and numerical outcomes.