2. Y Ltd. is planning to undertake any one of the following three mutually exclusive projects. The information relevant for this purpose is given below.

Projects Annual Cash Flow (`) Initial Investment (`) Project Duration (Years)

P Q

R 30,000 40,000 44,000 1,60,000 1,40,000 1,36,000 10 8

9 If cost of capital is 12%, advise the management regarding the selection of the best project.

[Given, present value of an annuity of `1.00 at a discount rate of 12%:
PVIFA (12%, 10 years) = 5.65; PVIFA (12%, 8 years) = 4.97; PVIFA (12%, 9 years) = 5.33].