The company you work for wishes to undertake 2 projects with a capital outlay of K180, 000 and its cost of capital is 10%. You are the Finance Manager and has been asked to advise which of the 2 projects could be chosen. The target period is 3 yrs.

Here are the projects’ net cash flows (in thousands of kwachas):

Year                             0          1          2        3         4         5

Project J (K’000)       -180      120        80     50       40      10

Project K (K’000)       -180       70         90     100     115   120

Required

Using the Payback period, which project would be selected if the projects are:

independent of each other

exclusive

Using the NPV, which project would be chosen if the projects are:

Independent

Exclusive