The Bolster Company is considering two

mutually exclusive projects:

Year Cash Flow A Cash Flow B

0 - $100 000 -$100 000

1 $31 250 $0

2 $31 250 $0

3 $31 250 $0

4 $31 250 $0

5 $31 250 $200 000

The required rate of return on these projects is 12 percent.

a.

What is each project's payback period?

b.

What is each project's net present value?

c.

What is each project's internal rate of return?

d.

Fully explain the results of your analysis. Which

project do you prefer?