We have two investment projects A&B. Both projects cost $250, and we require a 15% return of the two investments.

Year A B

1 $100 $100

2 $100 $200

3 $100 0

4 $100 0

aBased on the payback period rule, which project would you pick? Explain.

bBased on the NPV rule, which project would you pick? Explain.

cDo a) and b) give you the same conclusion? If not, why? Please elaborate.

dWhat other methods can you use to evaluate proposed investments? Please explain.