Your first assignment in your new position as an assistant financial analyst at Caledonia Products is to evaluate two new capital-budgeting proposals. Because this is your first assignment, you have been asked not only to provide a recommendation but also to respond to a number of questions aimed at assessing your understanding of the capital-budgeting process. This is a standard procedure for all new financial analysts at Caledonia, and it will serve to determine whether you are moved directly into the capital-budgeting analysis department or are provided with remedial training. The memorandum you received outlining your assignment follows:

To: New Financial Analysts

From: Mr. V. Morrison, CEO, Caledonia Products Re:

Capital-Budgeting Analysis Provide an evaluation of two proposed projects, both with 55-year expected lives and identical initial outlays of $150,000. Both of these projects involve additions to Caledonia's highly successful Avalon product line, and as a result, the required rate of return on both projects has been established at 14 percent. The expected free cash flows from each project are shown in the popup window:

Initial outlay	Project A: $150,000		Project B: $150,000
Inflow year 1	30,000		40,000
Inflow year 2	20,000		40,000
Inflow year 3	50,000		40,000
Inflow year 4	40,000		40,000
Inflow year 5	70,000		40,000

1.What is the payback period on project A?

2.What is the payback period on project B?

3.What is the NPV of project A?

4.What is the NPV of project B?

5.What is the PI for project A?

6.What is the PI for project B?

7.What is the IRR for project A?

8.What is the IRR for project B?