Two mutually exclusive projects are under consideration.
Year Project A Project B
0 -$5,000 -$9,000
1 $2,750 $1,000
2 $2,750 $3,000
3 $2,750 $5,000
4 $2,750 $7,000
5 $2,750 $9,000
(a) Which project should be selected if the simple payback method is used to make the determination?
(b) Which project should be selected if NPW or NFW were used? Consider the time value of money to be 15%.
(c) Explain any differences in results.