X-treme Vitamin Company is considering two investments, both of which cost $36,000. The cash flows are as follows:

Year	Project A			Project B
1	$	38,000		$	36,000
2		10,000			8,000
3		12,000			18,000

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.)

a-2. Which of the two projects should be chosen based on the payback method?

multiple choice 1

• Project A

• 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.)

b-2. Which of the two projects should be chosen based on the net present value method?

multiple choice 2

• Project B

• Project A

c. Should a firm normally have more confidence in the payback method or the net present value method?

multiple choice 3

• Net present value method

• Payback method