Two projects being considered by a firm are mutually exclusive and have the following projected cash flows: Project A Project B Year Cash Flow Cash Flow

Proj A Project B

0 -$300,000 -$300,000

1 145,500 $150,000

2 145,500 -$ 40,000

3 145,500 $370,000

The firms cost of capital is 10 percent. Based only on the information given,

1. What are the NPV for Project A and B? Which project do you choose based on the NPV?

2. What are the payback periods for Project A and B? Which project do you choose based on the payback periods?
3. What are the IRR for Projects A and B? Which project do you choose based on the IRR?