X-treme Vitamin Company is considering two investments, both of which cost $30,000. The cash flows are as follows: Year 1 2 3 Project A Project B $32,000 $30,000 15,000 14,000 6,000 11,000 Use Appendix B: for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.) Payback Period year(s) Project A Project B year(s) a-2. Which of the two projects should be chosen based on the payback method? Project A O Project B b-1. Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places.) Net Present Value Project A Project B b-2. Which of the two projects should be chosen based on the net present value method? Project B O Project A c. Should a firm normally have more confidence in the payback method or the net present value method? Net present value method O Payback method Appendix B Present value of $1, PVF PV = FV 1 (1 + i)" Percent Period 1% 3% 4% 5% 6% 8% 9% 11% 12% 1 0.943 0.893 0.990 0.980 0.971 0.943 0.926 0.857 7% 0.935 0.873 0.816 2 0.962 0.925 0.889 0.855 0.890 0.952 0.907 0.864 0.823 0.917 0.842 0.772 0.708 10% 0.909 0.826 0.751 0.683 0.901 0.812 0.731 0.797 0.712 3 0.840 0.915 0.888 0.794 0.735 4 0.792 0.763 0.659 0.636 0.971 0.961 0.951 0.942 5 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.863 0.784 0.747 0.621 0.593 0.567 0.681 0.630 6 0.507 0.705 0.665 0.535 0.482 7 0.583 0.452 8 0.627 0.540 0.434 0.404 0.933 0.923 0.914 0.905 0.837 0.813 0.789 0.766 0.744 0.722 9 0.500 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.481 10 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 0.592 0.558 0.527 0.463 0.429 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.361 0.322 0.287 11 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.896 0.804 0.391 0.352 0.317 0.286 0.258 0.232 12 0.788 0.397 0.257 13 0.368 0.340 0.773 0.758 0.743 0.229 0.205 14 0.887 0.879 0.870 0.861 0.853 0.844 15 0.555 0.362 0.315 0.239 0.209 0.183 0.163 16 0.728 0.458 0.339 0.188 17 0.701 0.681 0.661 0.642 0.623 0.605 0.587 0.570 0.554 0.478 0.412 0.170 0.146 0.714 0.700 0.686 0.436 0.416 0.292 0.270 0.250 0.317 0.296 18 0.836 0.497 0.469 0.442 0.417 0.394 0.371 0.350 0.331 0.312 0.233 0.174 0.097 0.054 0.212 0.153 0.534 0.513 0.494 0.475 0.456 0.375 0.130 19 0.828 0.396 0.116 0.232 0.215 0.218 0.198 0.180 0.164 0.149 0.092 0.057 20 0.277 0.258 0.184 0.820 0.780 0.104 0.673 0.610 0.194 0.178 0.116 0.075 0.377 0.295 0.231 0.138 0.124 0.074 0.044 25 0.146 0.059 30 0.742 0.552 0.131 0.099 0.308 0.208 40 0.672 0.453 0.307 0.142 0.067 0.046 0.032 0.022 0.015 0.005 0.033 0.011 0.003 50 0.608 0.372 0.228 0.141 0.087 0.034 0.021 0.013 0.009 Appendix B (concluded) Present value of $1 Percent Period 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 35% 40% 50% 1 0.885 0.877 0.862 0.840 0.833 0.800 0.741 0.714 0.667 0.847 0.718 2 0.783 0.743 0.694 0.640 0.769 0.675 0.444 0.855 0.731 0.624 0.534 0.870 0.756 0.658 0.572 0.497 0.769 0.592 0.455 0.706 0.593 3 0.579 0.512 0.693 0.613 0.543 0.641 0.552 0.609 0.515 0.549 0.406 0.301 0.510 0.364 0.260 0.296 0.198 4 0.592 0.499 0.482 0.350 0.269 5 0.519 0.476 0.456 0.419 0.402 0.223 0.186 0.410 0.328 0.262 0.210 6 0.480 0.425 0.456 0.400 0.432 0.376 0.327 0.437 0.370 0.314 0.266 0.410 0.354 0.305 0.390 0.333 0.352 0.296 0.335 0.279 0.233 0.207 0.159 7 0.165 0.122 0.132 0.088 0.059 0.133 0.095 0.068 8 0.376 0.351 0.285 0.249 0.168 0.123 .091 0.039 9 0.333 0.209 0.308 0.270 0.284 0.247 0.263 0.227 0.243 0.208 0.225 0.191 0.134 0.107 0.094 0.073 0.067 .050 .048 0.035 0.026 0.017 10 0.295 0.176 0.194 0.162 0.135 0.1 12 11 0.012 0.261 0.231 0.237 0.208 0.215 0.187 0.163 0.195 0.168 0.162 0.137 0.148 . 124 .086 0.069 0.056 0.043 0.037 0.027 0.025 0.018 12 0.008 0.178 . 152 0.130 0.111 13 0.204 0.182 0.145 0.1 16 0.093 0.055 0.033 .020 0.005 0.104 .088 14 0.160 0.141 0.125 0.099 0.078 0.044 0.025 0.003 0.181 0.160 15 0.108 0.065 0.020 0.002 0.140 0.123 0.108 0.095 .081 16 0.123 0.107 0.093 0.141 0.015 0.011 0.008 .084 .071 0.060 .093 0.054 0.035 0.028 0.023 0.002 0.015 0.012 .013 0.009 .006 0.005 .003 0.002 0.002 0.001 17 0.074 .062 .052 0.044 .037 0.125 0.080 0.045 0.006 0.069 0.059 .001 18 0.095 0.081 0.069 .051 0.038 0.018 .001 0.009 0.007 19 0.083 0.060 0.051 0.043 .031 0.014 0.111 0.098 .087 0.047 0.026 0.008 0.005 .003 .002 0.001 20 25 30 0.073 0.038 0.020 0.005 0.070 0.061 0.030 0.015 0.004 0.001 0.051 .024 0.012 0.003 .043 0.020 0.009 0.002 0.037 .016 0.007 0.001 .031 .013 0.005 0.001 0.026 0.010 0.004 .012 0.004 0.001 0.005 0.001 40 0.001 50 0.002 0.001 0.001