A technology startup evaluates two investment projects: Project A requires an initial investment of $200,000 with expected cash flows of $100,000 annually for 3 years, and Project B requires an initial investment of $300,000 with expected cash flows of $120,000 annually for 5 years. The required rate of return is 12%.

• Requirements:
  • Calculate the net present value (NPV) and internal rate of return (IRR) for each project.
  • Determine the payback period for each project.
  • Recommend which project(s) the startup should undertake based on NPV, IRR, and payback period.
  • Discuss the strengths and limitations of each capital budgeting method.