Question: Cranbrook Company is considering two mutually exclusive projects with the following cash flows. Ignore income tax. Year Cash flow Project 1 Cash flow Project

Cranbrook Company is considering two mutually exclusive projects with the following cash flows. Ignore income tax. Year Cash flow Project 1 Cash flow Project 2 0 (350,000) (50,000) 1 45,000 24,000 2 65,000 22,000 3 65,000 19,500 4 440,000 14,600 Required A. What is the payback period for each of these projects? Which project will the company choose if it applies the payback period decision rule? (12 marks) B. The required rate of return is 15%. What is the NPV for each of these projects? Which project will the company choose if it applies the NPV decision rule? (12 marks) C. What is the IRR for each of these projects? Using the IRR decision rule, which project should the company accept? (12 marks) D. Which project should you choose? Why? (4 marks)

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