Question: Assume projects A and B are mutually exclusive. The respective cash flows for projects A and B are stated below: If the discount rate, based

Assume projects A and B are mutually exclusive. The respective cash flows for projects A and B are stated below:

Project Year 0 Year 1 Year 2 Year 34 A $575,000 $373,000 If the discount rate, based on an investment of similar risk, is 10%, which of the projects should be accepted based on:

(a) Payback period rule

(b) NPV rule

(d) Profitability Index criteria

Project Year 0 Year 1 Year 2 Year 34 A $575,000 $373,000 $219,000 $185,000- B $980,000 $395,000 $477,000 $339,000

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