(Size effect) Montebano, Inc. plans to choose between two manually exclusive projects. The first one, A, is a larger project costing $2,500,000 initially and generates $270,000 each year. Project A is expected to last 10 years. A smaller project, B has an initial cost of $300,000 and is expected to produce free cash flows of $50,000 per year over 10 years. Montebano has a weighted average cost of capital of 12%.

a. Calculate the NPV, and IRR.

b. Which project should be accepted?

c. Discuss the facts of this problem and the effects of Montebano's decision.