q4

2. Zanzibar Co. is considering choosing between two investments, A and B. The rate of return for each project is 14 percent and the tax rate for both is 34 percent. The cashflow data and depreciation costs for both proposals are listed below: Project A Year 0 2 3 4 (28,000) Cashflows Depreciation 8,000 5,600 8,000 8,960 8,000 5,376 8,000 3,226 Year (cont.) Cashflows Depreciation Project A 5 8,000 3,225 6 8,000 1,613 7 8,000 0 Project B Year 0 2 3 4 (20,000) Cashflows Depreciation 5,000 4,000 5,000 6,400 6,000 3,840 6,000 2,304 Year (cont.) Cashflows Depreciation 5 7,000 2,304 6 7,000 1,152 NO 7,000 For both projects find the following: (a) Payback Period, (b) Net Present Value and (c) Profitability Index