P10-21 All techniques, conflicting rankings Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, each with an initial investment of $150,000. The company's board of directors has set a maximum 4-year payback requirement and has set its cost of capital at 9%. The cash inflows associated with the two projects are shown in the following table.

Cash inflows (CFt)

Year Project A Project B

1 $45,000 $75,000

2 45,000 60,000

3 45,000 30,000

4 45,000 30,000

5 45,000 30,000

6 45,000 30,000

a. Calculate the payback period for each project.

b. Calculate the NPV of each project at 0%.

c. Calculate the NPV of each project at 9%.

d. Derive the IRR of each project.

e. Rank the projects by each of the techniques used. Make and justify a recommendation.

f. Go back one more time and calculate the NPV of each project using a cost of capital of 12%. Does the ranking of the two projects change compared to your answer in part e? Why?