Projects A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's cost of capital is 12%. The cash flows for each project are shown in the following table:

Project A Project B

Initial investment 150,000 110,000 Year Cash inflows 1 35,000 35,000 2 40,000 35,000 3 45,000 35,000 4 50,000 35,000 5 55,000 35,000

a.Calculate each project's payback period.

b.Calculate the net present value (NPV) for each project.

c.Calculate the internal rate of return (IRR) for each project.

d.Indicate which project you would recommend.