Reference no: EM133109681

A firm is considering two projects A and B. The firm's required rate of return is 10%

Year Project A Project B

0 $100,000 $160,000

1 $50,000 $30,000

2 $20,000 $40,000

3 $10,000 $50,000

4 $10,000 $20,000

5 $30,000 $20,000

6 $20,000 $50,000

REQUIRED;

A. Calculate the following for each project:

i. Payback period

ii. Net present value

B. Based on the calculations above, which project should be accepted if the projects are mutually exclusive and why?

C. Explain the following terms:

i. Net present value

ii. Payback method

iii. Return on investment