Question 4

Project A and Project B have the following cash flows:

Year	Project A	Project B
0	-100000	-160000
1	30000	40000
2	35000	45000
3	40000	50000
4	45000	55000
5	50000	60000
6	55000	65000

Requirements:

1. Calculate the NPV of both projects assuming a required rate of return of 7%.
2. Determine the IRR for each project.
3. Calculate the payback period for both projects.
4. Evaluate and state which project(s) should be selected if they are independent.
5. Determine which project should be selected if they are mutually exclusive and explain why.