Question: Calculating payback period and NPV. Incosoft, Inc., has the following mutually exclusive projects.
YEAR PROJECT A PROJECT B
0 -£ 7,500 -£5,000
1 £ 4,000 £2,500
2 £ 3,500 £ 1,200
3 £ 1,500 £ 3,000
a) Suppose Incosoft's payback period cutoff is two years. Which of this two projects should be chosen?
b) Suppose Incosoft use the NPV rule to rank this two projects. Which project shuld be chosen if the appropriate discount rate is 15%?