You company is in the process of choosing the better of two equal-risk, mutually exclusive capital expenditure projects-A and B. The relevant cash flows for each project are shown in the following table. Assumption: the terminal cash flow is 0 and the discount rate is 5% (16 Points).

Year

Project A

Project B

0 (Initial Investment)

- $ 20,000

- $ 20,000

1

$ 6,000

$ 8,000

2

6,000

6,000

3

6,000

5,000

4

6,000

5,000

26.1 Calculate projects' payback period for Project A(Round to two decimal points--e.g. 1.25)

Question 26 options:

Question 27(3 points)

26.2Calculate projects' payback period for Project B(Round to two decimal points--e.g. 1.25)

Question 27 options:

Question 28(2 points)

26.3Based on the information from 26.1 and 26.2, which investment option would you chose?

Question 28 options:

Project A

Project B