Elm City Electronics is considering two mutually exclusive projects that differ greatly on the required investment and projected cash flow s. The initial investment required for project II is $250,000 while for project II it is $25,000. Projected after-tax cash flows are shown below:

The opportunity cost of capital for Elm City is 6%.
a. Decide w hic h project you would choose by apply in g each of the following decision criteria separately. Explain your reasoning in each case: (1) payback period, (2) discounted payback period, (3) NPV, (4) IRR, and (5) profitability index.
b. Which project would you eventually choose? Explain your answer.

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Cash Flows, $ Year Project I Project II 12,000 15,000 18,000 8,000 6,000 18,000 30,000 6,000 250,000 500 4,