|
Year
|
Project A
|
Project B
|
|
1
|
$12,000
|
$10,000>
|
|
2
|
$8,000>
|
>$6,000
|
|
3
|
$6,000
|
$16,000
|
[A] Which of the two projects should be chosen based on the payback method?
[B] Which of the two projects should be chosen based on the net present value method? Suppose a cost of capital of ten percent.
[C] Should a firm normally have more confidence in answer a or answer b?