Valley Products, Inc. is considering two independent investments having the following cash flow streams:

Year Project A Project B

0 $50,000 -40,000

1 +20,000 +20,000

2 +20,000 +10,000

3 +10,000 + 5,000

4 + 5,000 + 5,000

5 + 5,000 +40,000

Valley uses a combination of the net present value approach and the payback approach to evaluate investment alternatives. It requires that all projects have a positive net present value when cash flows are discounted at 10 percent and that all projects have a payback no longer than three years. Which project or projects should the firm accept? Why?