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A company has the following mutually exclusive projects. Year     Project A          Project B 0         -$15,300      &

A company has the following mutually exclusive projects.

Year     Project A          Project B

0         -$15,300           -$10,700

1              8,700                5,300

2              7,400                4,300

3              3,100                4,800

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a. Suppose the company's payback cutoff is two years. Which of these two projects should be chosen?

b. Suppose the company uses the NPV rule to rank these two projects. Which projects should be chosen if the appropriate discount rate is 15 percent? ( show your work)

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