Your first assignment in your new position as assistant financial analyst at Caledonia Products is to evaluate two new capital$-$budgeting proposals. Because this is your first assignment, you have been asked not only to provide a recommendation but also to respond to a number of questions aimed at assessing your understanding of the capital$-$budgeting process. This is a standard procedure for all new financial analysts at Caledonia, and it will serve to determine whether you are moved directly into the capital$-$budgeting analysis department or are provided with remedial training. The memorandum you received outlining your assignment follows:

To: New Financial Analysts

From: Mr$.$ V$.$ Morrison, CEO, Caledonia Products

Re: Capital$-$Budgeting Analysis

Provide an evaluation of two proposed projects, both with $5-$year expected lives and identical initial outlays of $$150,000.$ Both of these projects involve additions to Caledonia's highly successful Avalon product line, and as a result, the required rate of return on both projects has been established at $11$ percent. The expected free cash flows from each project are shown in the popup window:

In evaluating these projects, please respond to the following questions:

a$.$ The capital$-$budgeting process is so important because capital$-$budgeting decisions involve investments requiring rather cash outlays at the beginning of the life of the project and commit the firm to a particular course of action over a relatively time horizon. $($Select from the drop$-$down menus.$)$ a$)...$ rather $-->$ small,moderate,large $($choose $1$ of them$)$ b$)...$ relatively $-->$short, intermediate,long $($choose $1$ of them$)$