Use net present value and payback period method, Financial Accounting

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Given the following cash flows for projects A and B:

  Year     Project A   Project B

    0       -100,000     -150,000   (Project Cost)

    1         25,000         50,000

    2         30,000         60,000

    3         35,000         70,000

    4         80,000         50,000

Assume that the cost of capital is 10%.

a. Use the net present value method to select the better of the two projects.

b. Use the payback period method to select the better of the two projects.

c. How does the IRR method differ from the above two?


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