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Consider the following two mutually exclusive projects:

Year | Cash Flow (A) | Cash Flow (B) |

0 | $ 356,000 | $ 40,000 |

1 | 31,000 | 23,000 |

2 | 42,000 | 15,200 |

3 | 50,000 | 14,100 |

4 | 445,000 | 11,200 |

The required return on these investments is 13 percent.

**Required:**

(a) What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

(b) What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g.,32.16).)

(c) What is the IRR for each project? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

(d) What is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).)

(e) Based on your answers in (a) through (d), which project will you finally choose?

The payback period is the duration a project must get back its initial investment after getting to the breakeven point of the investment. The project that has a shorter payback time should be selected as an investment.

(a)(b)Cash flow streamCash flow stream(c)Cash flow streamCash flow stream(d)Project A

Project B

(e)Accept project B because it has a higher IRR or profitability index.