A firm is considering two projects A and B. The firms required rate of return is 10%

Year	Project A	Project B
0	$100,000	$160,000
1	$50,000	$30,000
2	$20,000	$40,000
3	$10,000	$50,000
4	$10,000	$20,000
5	$30,000	$20,000
6	$20,000	$50,000

REQUIRED;

A. Calculate the following for each project:

I. Payback period (4 marks)

II. Net present value (10 marks)

III. Profitability index ( 4 marks)

B. Based on the calculations above, which project should be accepted if the projects are mutually exclusive and why? (5 marks)

C. Explain the following terms:

I. Accounting rate of return

II. Payback method

III. Profitability Index