You are considering the following two mutually exclusive projects. Both projects will bedepreciated using straight-line depreciation to a zero book value over the life of the project.Neither project has any salvage value.

Project AProject B

YearCash FlowYearCash Flow

0-$75,0000-$70,000

1$19,0001$10,000

2$48,0002$16,000

3$12,0003$72,000

Required rate of return10 %13 %

Required payback period2.0 years2.0 years

Required accounting return8 %11 %

Based on the net present value method of analysis and given the information in the problem, you should:

Question 1 options:

accept both project A and project B

accept project A and reject project B

accept project B and reject project A

reject both project A and project B

accept whichever one you want as they represent equal opportunities

Based upon the internal rate of return (IRR) and the information provided in the problem, you should:

Question 2 options:

accept both project A and project B

reject both project A and project B

accept project A and reject project B

accept project B and reject project A

ignore the IRR rule and use another method of analysis

ased upon the payback period and the information provided in the problem, you should:

Question 3 options:

accept both project A and project B

reject both project A and project B

accept project A and reject project B

accept project B and reject project A

require that management extend the payback period for project A since it has a higher initial cost

Based upon the profitability index (PI) and the information provided in the problem, you should:

Question 4 options:

accept both project A and project B

accept project A and reject project B

accept project B and reject project A

reject both project A and project B