Your company has two investment options, Project U and Project V, with the following projected cash flows:

Project U:

• Year 0: $(150)
• Year 1: $40
• Year 2: $60
• Year 3: $80
• Year 4: $100

Project V:

• Year 0: $(130)
• Year 1: $30
• Year 2: $50
• Year 3: $70
• Year 4: $90

The company's required rate of return is 10%.

a. Describe the purpose of capital budgeting. b. Calculate the payback period for Project U and Project V. c. Explain the difference between NPV and IRR. d. Calculate the NPV and IRR for both projects. e. Which project should be accepted based on NPV and IRR?