You are helping your company make a capital budgeting decision. Projects A and B are mutually exclusive projects and have the following projected after-tax cash flows. The company has determined that the proper discount rate for the project is 9%. The target payback period and discount payback period are 3 years and 2 years respectively.

	Project A	Project B
Year 0	(400,000)	(100,000)
Year 1	50,000	50,000
Year 2	70,000	6,000
Year 3	72,000	66,000
Year 4	420,000	80,000

Calculate the payback period, discounted payback period, net present value, internal rate of return and profitability index for each project. Based on each individual measure, what are your recommendations?

Criteria	Project A Result	Project B Result	Recommendation?
Payback Period
Discounted Payback Period
Net Present Value
Internal Rate of Return
Profitability Index

Based on all five measures taken together, what is your recommendation? If the projects were not mutually exclusive, would your recommendation change? If the discount rate decreases to 8%, how will each of these measures be impacted? Will each increase or decrease or remain the same?

Criteria	Increase/Decrease/Remain the Same
Payback Period
Discount Payback Period
Net Present Value
Internal Rate of Return
Profitability Index