Project A has an initial investment of $15,000 and it generates positive cash flows of $4,750 each year for the next 6 years. Project B has an initial investment of $17,600 and it generates positive cash flows of $4,500 each year also for the next 6 years. The firm is currently facing an average cost of capital (or discount rate) of 11%.

a. Calculate the NPV of each project. Show your work. If Project A and B were independent, which one(s) would you select? If Project A and B were mutually exclusive, which one(s) would you select? Explain.

b. Calculate the IRR of each project. Show your work. If Project A and B were independent, which one(s) would you select? If Project A and B were mutually exclusive, which one(s) would you select? Explain.

c. Assuming that the two projects are mutually exclusive, what is the cost of capital that will create a conflict in the selection (i.e. what is the crossover rate)?

d. Project C was added to the potential capital budget list at the last minute as a mutually exclusive alternative to Project B. It has an initial cash outlay of $17,600 and it generates its only positive cash flow of $37,900 in the sixth year. Years 1 through 5 have $0 cash flow. Calculate Project Cs NPV. Which alternative, B or C, would you choose? Show your work and explain.

e. Calculate the IRR of Project C. Which alternative, B or C, would you choose? Show your work and explain.

f. Since Projects B and C are mutually exclusive, would you recommend that Project B or Project C be added to the capital budget for this year? Explain your choice.