Consider the following two mutually exclusive projects:

Year Cash Flow $($A$)$ Cash Flow $($B$)$

$0$$$350,000$$$35,000$

$125,00017,000$

$270,00011,000$

$370,00017,000$

$4430,00011,000$

Assume you require a $15$ percent return on your investment and a payback of $4$ years.

a$.$ If you apply the discounted payback criterion, which investment will you choose?

Why? $(6$ points$)$

b$.$ If you apply the NPV criterion, which investment will you choose? Why? $(6$

points$)$

c$.$ Based on your answers in $($a$)$ and $($b$),$ what you can say anything about the IRR of

both projects? which project will you finally choose? Why? $(3$marks$)$

Please answer the question properly with proper steps and answers to eaxh part