All techniques with NPV profile: Mutually exclusive projects Projects A and B, of

equal risk, are alternatives for expanding Rosa Company's capacity. The firm's cost

of capital is 13%. The cash flows for each project are shown in the following table.

a. Calculate each project's payback period.

b. Calculate the net present value (NPV) for each project.

c. Calculate the internal rate of return (IRR) for each project.

d. Draw the net present value profiles for both projects on the same set of axes, and

discuss any conflict in ranking that may exist between NPV and IRR.

e. Summarize the preferences dictated by each measure, and indicate which project

you would recommend. Explain why.

Project AProject B

Initial investment (CF0)$80,000$50,000

Year (t)Cash inflows (CFt)

1$15,000$15,000

220,00015,000

325,00015,000

430,00015,000

535,00015,000