Question

3)X-treme Vitamin Company is considering two investments, both of which cost $30,000. The cash flows are as follows:
 YearProject AProject B1$32,000 $21,000 2 15,000  14,000 3 6,000  11,000  Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1.Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.)  Payback Period  Project A year(s)    Project B year(s)   a-2.Which of the two projects should be chosen based on the payback method?   Project AProject B b-1.Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent.(Do not round intermediate calculations and round your final answers to 2 decimal places.)  Net Present Value  Project A$     Project B$   
 b-2.Which of the two projects should be chosen based on the net present value method?   Project AProject B
 c.Should a firm normally have more confidence in the payback method or the net present value method?   Net present value methodPayback method

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