You are asked to evaluate two projects.Project A requires an initial investment of 10000 and pays back in years 1 to 4 the following amounts 1000, 2500, 4750, 6500. The equipment requires an upgrade in year 2 costing 1500. Project B requires an initial investment of 9000 and pays back in years 1 to 4 6000, 3000, 1000, 1000. A maintenance charge in year 3 will cost 500.

Using a discount rate of 5% calculate the NPV for each project.

What is the IRR for each project?

What is the Payback period for each project?

Which project would you recommend? Give your reasons.