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:

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.

Project A B

Initial investment $230,000 $200,000

Year Cash inflows

1 $60,000 $60,000

2 $65,000 $60,000

3 $70,000 $60,000

4 $75,000 $60,000

5 $80,000 $60,000