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Tropical Candy Inc. is considering two mutually exclusive projects, A and B. Their cash flows are shown below. Both Project A and Project B have

Tropical Candy Inc. is considering two mutually exclusive projects, A and B. Their cash flows are shown below. Both Project A and Project B have an estimated cost of capital of 10%.  Cash flows will be realized at the end of each time period. 

Year, t
Project A Cash Flow at time t
Project B Cash Flow at time t

0

-1800

-600

1

110

660

2

263.78

72.6

3

133.1

53.24

4

1024.87

146.41

5

3221.02

1610.51

  • Calculate the NPV for each project. Which, if either, the project should be accepted?  Why?
  • Are there other capital budgeting criteria?  If yes, list at least one.

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