Project A has the following cash flows.

		Year 1	Year 2	Year 3	Year 4	Year 5
Initial Investment	$75,000
Cash Inflow		$ 20,000	$ 25,000	$ 30,000	$ 36,000	$ 50,000
Required Rate of Return	8%

Calculate the following measures (note: show your calculations).

1. NPV of the project A
2. The project payback period and Profitability Index (showing a decimal figure).
3. Suppose you want to consider inflation rate in NPV. If the annual inflation rate

is 5%, what is the new NPV?

4. Project B has the following cash flow:

PROJECT B		Year 1	Year 2	Year 3	Year 4	Year 5
Initial Investment	$50,000
Cash Inflow		$ 20,000	$ 20,000	$ 20,000	$ 20,000	$ 20,000
Required Rate of Return	10%

Compare the NPV between Project A and Project B. Which project is more profitable?

What is the difference in NPV between the two projects?