ABC Inc. is considering two investment projects. Both projects have an initial cost of $38,000 and total expected cash inflows of $50,000. The cash inflows of Project AA are $6,000, $10,000, $16,000 and $18,000 respectively over the next four years. The cash inflows of Project BB are $18,000, $16,000, $10,000 and $6,000 over the next four years, respectively. The required yearly rates of return of both projects are 8% and the firm has a 3-year cut-off period for the projects. Estimate the payback period and the net present value of the two projects.
