Your company is evaluating two projects, Project A and Project B. Project A involves expanding the current production line, while Project B involves introducing a new product to the market. Both projects require a significant investment and have a 4-year lifespan. The expected cash flows for each project are as follows:

Project A:

• Year 0: $(200)
• Year 1: $50
• Year 2: $70
• Year 3: $100
• Year 4: $150

Project B:

• Year 0: $(150)
• Year 1: $40
• Year 2: $60
• Year 3: $80
• Year 4: $120

The company's required rate of return is 12%.

a. What is capital budgeting? b. Calculate the payback period for Project A and Project B. c. Define Net Present Value (NPV) and calculate the NPV for both projects. d. Define Internal Rate of Return (IRR) and calculate the IRR for both projects. e. Which project is more favorable based on NPV and IRR?