Year	Project A (upgrade existing B-Wings)	Project B (develop new X-Wings)
0	-$250,000	-$400,000
1	$100,000	$50,000
2	$80,000	$70,000
3	$60,000	$80,000
4	$40,000	$120,000
5	$20,000	$200,000

The above are two mutually exclusive investment projects for Rebel Alliance. The Alliance requires getting their invested amount fully paid back within 5 years. The Alliances cost of capital (i.e., the required return on investment) is 6% annually.

1. Based on the Payback rule alone, what project(s) should the Alliance accept?

1. Project A only.
2. Project B only.
3. Both Projects A and B.
4. Neither Project A or B.

2. Based on the NPV rule alone, what project(s) should the Alliance accept?

1. Project A only.
2. Project B only.
3. Both Projects A and B.
4. Neither Project A or B.

3. Based on the IRR rule alone, what project(s) should the Alliance accept?

1. Project A only.
2. Project B only.
3. Both Projects A and B.
4. Neither Project A or B.

4. Based on your answers to Q8-10, what project(s) should the Alliance accept?

1. Project A only.
2. Project B only.
3. Both Projects A and B.
4. Neither Project A or B.

5. At what discount rate would the Alliance be indifferent between the two projects?

1. 4%.
2. 5%.
3. 6%.
4. 7%
5. 8%.