A company has to make a choice between two projects namely A & B. The initial capital outlay of two projects are $365,000 and $568,000 respectively for A and B. There will be no scrap value at the end of the life of both the projects. The opportunity cost of capital of the company is 16%. The annual income are as under:

Year Project A Project B

1

15,000

8,500

2

23,000

11,100

3

27,500

15,200

4

19,600

14,700

5

18,400

22,500

6

23,400

28,100

7

35,200

39,200

8

38,100

50,400

9

39,000

82,400

10

45,150

79,200

11

46,800

98,640

12

48,630

110,800

13

52,180

61,400

14

50,280

70,560

15

61,890

52,400

There will be additional cash outflow of $23,000 and $31,000 at the end of 8 year for project A and B respectively.

Analyze which project is better for the company using following approaches:

1. Net present value 2. Payback period 3. Discounted payback period 4. Profitability index