You are the CFO for a marketing firm

You are the CFO for a marketing firm. An analyst who is evaluating projects presents two mutually exclusive project that will grow the firm's client base and revenues. Both projects capital requirements and project cash flows are presented below:

Project A                                          Project B

Year  Cash Flow                           Year  Cash Flow

  0       - € 87,000                            0         - € 85,000

  1           31,000                            1             15,000

  2           37,000                            2             20.000

  3           44,000                            3              90,000

Discount Rate. Project A               Discount Return, Project B

12 percent                                        14 percent

A's Required payback period        B's Required payback period

2.5 years                                           2.5 years

Calculate the NPV and Payback period for these projects. If the CIO requires NPV as the decision criteria which project should he/she accept?

Project A

Project B

Both Project A and B

Show calculations in making your recommendation.

If the CIO decides to use a payback criteria would he/she accept the same project as in the question above?  Yes        No

Show calculations to prove your recommendation?