Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, that both cost $130,000. The company's board of directors has set a 4-year payback requirement the cost of capital is 7%.

The project cash flows are shown in the following table:

Cash flows (CFt)

Year Project A Project B

1. $40,000 $75,000

2. $40,000 $70,000

3. $40,000 $20,000

4 $40,000 $20,000

5 $40,000 $20,000

6 $40,000 $20,000

a. Calculate the payback period for each project. Rank the projects by payback period.

b.Calculate the NPV of each project. Rank the project by NPV.

c.Calculate the IRR of each project. Rank the project by IRR.

d.Make a recommendation.