4. Toms Auto Service, Inc. is considering two projects. Project A has a cost of $30,000 and will provide cash flows of $8,000 per year for 5 years. Project B has a cost of $28,000 and will provide cash flows of $5,600 per year for 5 years. If the firm uses the Payback method to accept or reject projects, which project should be selected?

A: Project A: PB = 3.75 years

B: Project B: PB = .20 years

C: Project A: PB = .27 years

D: Project B: PB = 5.0 years

E: None of the answers provided is correct.

5. Isaac's Trucking Company, Inc. is planning to value a project. The project will require an initial investment of $1,250,000 and will generate cash flows of $250,000 in year 1, $312,500 in year 2, $375,000 in year 3, $437,500 in year 4, and $475,000 in year 5. The firm will be using 40% debt and 60% equity to finance the project. If the firm's cost of capital is 16% should the firm accept or reject the project?

A: Accept the project because the IRR is less than 16%

B: Accept the project because the NPV is positive at a discount rate of 14.5%

C: Reject the project because the IRR is less than 16%

D: Cannot be computed

E: None of the answers provided is correct.