Projects A and B, both of equal risk, are mutually exclusive alternatives for expanding Corporations capacity. The firms cost of capital is 13%. The cash flows for each project are shown in the following table. SHOW ALL WORK

Project A Project B

Year 0: ($80,000) Year 0: ($80,000)

Year 1: $15,000 Year 1: $15,000

Year 2: $20,000 Year 2: $15,000

Year 3: $25,000 Year 3: $15,000

Year 4: $30,000 Year 4: $35,000

Year 5: $30,000 Year 5: $25,000

A. What is each projects payback period? (4 points)

B. What is each projects net present value? (4 points)

C. What is each projects internal rate of return? (4 points)

D. Which project should Corporation accept and why? Explain. (4 points)