Show all your work. Answers without calculation/work will not earn points.

A firm is considering the following two mutually exclusive projects A and B. The required rate of return is 15% for each project.

Year	Cash Flow (A)	Cash Flow (B)
0	-$350,000	-$35,000
1	25,000	17,000
2	70,000	11,000
3	70,000	17,000
4	430,000	11,000

(1) Based on the payback period criterion, which project would you choose? Why? (8 points)

(2) Based on the NPV criterion, which project would you choose? Why? (8 points)

(3) Based on the IRR criterion, which project would you choose? Given your answer in (2) where you used the NPV criteria, is your choice the right one? Explain why or why not. (14 points)