Question: Amiba PLC is evaluating 2 mutually exclusive projects. Both these projects have 5 years of useful life and has no salvage value. The table below

Amiba PLC is evaluating 2 mutually exclusive projects. Both these projects have 5 years of useful life and has no salvage value.

The table below shows these two projects' cash inflow and outflow.

Future Cash Flows CostYear 1Year 2Year 3Year 4Year 5Project A$500 000222 850212 140175 600177 000173 500Project B$600 000257 060252 090245 020239 000225 000

Required:

Based on the nature and the risk associated with projects in this nature, the finance team has determined a 10% required rate of return for project valuation and a payback period of 2 years.

You are required to determine which project to be accepted based on:

Simple payback period method.
Net present value (NPV) method

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