The following two project of equal risk are mutuality exclusive alternatives for expanding the firm's capacity. The firm cost of capital is 12%. The cash flows for each project are given in the following table.

Project white Project black

investment Year $60,000 $60,000

Year Cash inflows Cash inflows

1 36,000 46500

2 31500 30,000

3 28500 15000

Requires

a. Calculate each project's payback period using the pay back period criterion which project is preferable?

b. Calculate NPV for each value, using the NPV which project is preferable.

c. Calculate the IRR to the nearest percentage for each project, using the internal rate of return, which project is preferable

d. Calculate the probability index and using which project is preferable

pur-new-sol

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