Giant Equipment Ltd. is considering two projects to invest next year. Both projects have the same
start-up costs. Project A will produce annual cash flows of $42,000 at the beginning of each year for
eight years. Project B will produce cash flows of $48,000 at the end of each year for seven years. The
company requires a 12% return.
Required:
a) Which project should the company select and why?
b) Which project should the company select if the interest rate is 14% at the cash flows in Project B
is also at the beginning of each year?

An external consultant recommends that a plant installs a bank of capacitors for power factor correction. this will reduce the peak electrical demand charges by an average of 93 kw every month. the plant current pays $13 per kw in peak demand charges. the capacitor bank will include 223 kw of fixed capacitors, and 183 of variable capacitors. the fixed capacitors cost $59 per kw, and the variable capacitors will cost $65 per kw. the consultant charges 21% of the equipment costs to install the capacitors. because this project will reduce the demand for the electric utility, they are prepared to provide a one-time rebate of $42 per kw of reduced demand. what is the simple payback period for this project (in years)?