The following information relates to two independent projects that Jekyll & Hyde Ltd is considering. Their cost of capital is 15 per cent. Costs and cash flows are given in the following table. Year Project 1 Project 2 0 $(1,250,000) $(1,250,000) 1 $250,000 $350,000 2 $350,000 $350,000 3 $450,000 $350,000 4 $500,000 $350,000 5 $750,000 $350,000

(a) Given the targeted payback period is 4 years, which project or projects should the company choose if the payback period method is used? (2 marks)

(b) Discuss why the NPV method is considered superior to the payback periods evaluation method. (1 mark )