The cash flows for projects A, B, and C are given below. Calculate the payback period and net present value for each project (assume a 10% discount rate). If A and B are mutually exclusive and C is independent, which project, or combination of projects, is preferred using (a) the payback method or (b) the net present value method? What do the results tell you about the value-additivity properties of the payback method?
Table A

Table B

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Before Year 1 Year 2 Year 3 Year 4 Year 5 Revenue 1,000 1,000 1000 1,000 1,000 Variable cost 300 300 200 Net operating income Interest expense Eamings before taxes 200 -100 -100 100 axes 100 -100 -100 Net income 100 100 100 After Year 1 1,000 210 480 310 Year 2 1,000 210 480 310 Year 3 1.000 210 480 310 Year 4 1,000 210 480 310 Year 5 1,000 210 480 310 Revenue Variable cost Depreciation Net operating income Interest expense 310 155 155 Earnings before taxes 310 -155 155 310 155 155 310 -155 155 310 -155 155 axes Net income 1003 oje B -110- 1021 0123