Suppose XYZ Company must pick between two projects that each require an initial $10,000 outlay for facilities. The cash flows yielded by each investment for the first 5-years (years 1-5 consecutively) are:

Project A: +800, +600, 0, +400, +900

Project B: -1,000, +2,000, -2,000, +5,000, +6,000

Discuss the following:

1. Contrast the projects in terms of their risk/return relationship

2. Contrast the projects in terms of their potential for problems in the area of viability (liquidity/solvency).