A company is analyzing two mutually exclusive projects, S and L, whose cash flows are shown below:

Year Project S Project L

0 ($ 2,000) ($ 2,000)

1 1,800 0

2 500 500

3 20 800

4 20 1,600

The companys cost of capital is 9 % and it can get an unlimited amount of capital at that cost.

(a) Calculate the Payback Period, NPV and IRR of both projects (show your work to receive any credit).

(b) Using NPV and IRR methods, which project would you recommend and why?

(c) Is there any conflict in ranking of these projects by using NPV and IRR methods? If conflict exists, which methods should be used and why?