A four (4) year financial projection for a project has net yearly cash flows of $20,000 (Year 1), $25,000 (Year 2), $30,000 (Year 3), and $50,000 (Year 4). It will cost the company $100,000 of initial investment to implement the project. If the companys hurdle rate is 15% and the estimated annual inflation for the next four years is 4%, calculate the Net Present Value (NPV) for the project.

Recommend whether the company should invest in this project. Why or why not?

Two projects are being considered for selection.

• Project A will cost $300,000 to implement and is expected to have annual net cash inflow of $50,000.
• Project B will cost $1,200,000 to implement and should generate annual net cash inflow of $200,000.

The Project A company is very concerned about their cash flow. Project B is using new technology that should give the company a market advantage if successful, whereas Project A is using proven technologies.

Using the Pay Back method of project selection, which project is the better selection, given the information above? Show your calculations and explain your reason for selecting either Project A or Project B.