Question: TCM is considering two mutually exclusive projects. TCM has a 7% cost of capital and follows the straight-line method of depreciation. TCM average rate

TCM is considering two mutually exclusive projects. TCM has a 7% cost of capital and follows the straight-line method of depreciation. TCM average rate of tax is 25%. The following is the estimated earnings after tax shown below: Initial investment ($) Year 1 2 3 4 5 6 Project A 650,000 120,000 170,000 220,000 250,000 270,000 90,000 Project B 440,000 Earnings after tax ($) 200,000 170,000 150,000 50,000 30,000 30,000 I a. Calculate the Net Present Value, Payback period and Profitability Index of each project. b. Rank and assess acceptance of each project based on your findings in a.

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