Final answer:
The payback period for Project F is 3 years, while Project G takes slightly over 3 years, though it may not meet the company's three-year payback criterion. The NPV for both projects would be calculated by discounting the projected cash flows using a 12% return rate, but exact figures cannot be provided without data for Years 4 and 5.
Step-by-step explanation:
To calculate the payback period for Projects F and G, you would add up the cash flows for each year until the initial investment is recovered. For Project F, the cash flows over the years are $57,000, $53,000, and $63,000. Cumulatively, by the end of Year 2, Project F recovers $110,000 ($57,000 in Year 1 plus $53,000 in Year 2), and by the end of Year 3, it fully recovers the initial investment and begins to provide a profit. Thus, the payback period for Project F is exactly 3 years.
For Project G, it has cash flows of $37,000, $52,000, and $93,000 in the first three years. By the end of Year 3, Project G recovers $182,000 ($37,000 in Year 1 + $52,000 in Year 2 + $93,000 in Year 3). Since this is less than the initial investment, you would have to consider Year 4 which provides an additional $123,000, which is more than enough to recover the remaining amount. Therefore, the payback period for Project G would be a little over 3 years, but since the company uses a three-year cutoff, it may not meet the payback criteria.
The net present value (NPV) is a key financial figure that represents the value of an investment, taking into account the time value of money. It is calculated by summing the present values of future cash flows and subtracting the initial investment. In this case, based on a 12 percent required return, you would discount each of the cash flows back to their present value and sum them to get the NPV for each project. Without the specific cash flows for Years 4 and 5 included in the description, exact NPV values cannot be calculated here.