You are a financial analyst working at Officeworks and you are evaluating the following two mutually exclusive projects: (20 marks)

Time Period	Project A Cash Flows	Project B Cash Flows
Cost	(80,000)	(20,000)
Year 1	10,000	30,000
Year 2	20, 000	4,000
Year 3	20,000	3,000
Year 4	150,000	3,000

a) Assume the estimated cost of capital for these projects is 10% p.a. and the maximum acceptable payback period is 3 years, which project would be selected if the payback method is used?

b) assume the estimated cost of capital for these projects is 10% p.a., which project would be selected if the NPV method is used?

c) Comment on the results from parts (a) and (b), and make your final decision on which project to undertake.