(Size-disparity problem) The D. Dorner Farms Corporation is considering purchasing one of two fertilizer-herbicides for the upcoming year. The more expensive of the two is better and will produce a higher yield. Assume these projects are mutually exclusive and that the required rate of return is 10 percent. Given the following free cash flows: PROJECT A PROJECT B Initial outlay $500 $5,000 Inflow year 1 700 6,000 Calculate the NPV of each project. Calculate the PI of each project. Calculate the IRR of each project. If there is no capital-rationing constraint, which project should be selected? If there is a capital- rationing constraint, how should the decision be made?

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