You recently went to work for Harper's Motor Company, a supplier of auto repair parts used in the after-market with products from Fiat, General Motors, Ford and Honda as well as other automakers. The CFO has provided you with the cash flows for two proposed projects. Project A involves adding a new item to the firm's ignition system line; it would take some time to build up the market for this product so that cash inflows would increase over time. Project B involves an add-on to an existing line, and its cash flows would decrease over time. Both projects have 3-year lives because Harper's is planning to introduce entirely new models after 3 years. Here are the projects' after-tax cash flows (in thousands of dollars). Time 0 Project A Project B -$1000 -$1000 1 2 3 $350 $850 $890 $800 $650 $400 Depreciation, salvage values, net operating working capital requirements and tax effects are all included in these cash flows. The CFO also made subjective risk assessments of each project and she concluded that both projects have risk characteristics that are similar to the firm's average project. Harper's WACC is 12%. You must determine whether one or both of the projects should be accepted. Items to consider and address in your memo to Harper's Motor Corporation Board of Directors: Criticisms of the payback period. Should the projects be accepted based on the criteria of the payback period; NPV; or IRR? Should either project be accepted? How do changes in the required rates of return affect the project's internal rate of return? If the firm begins to accept riskier projects, how is the firm's required rate of return adjusted and how does this affect the selection process for future projects?