5 A firm has a choice between two mutually exclusive investment projects, A and B, with the following initial outlays and timed returns: Project A B Initial outlay 800 1000 Year 1 -100 300 2 200 400 3 250 300 4 5 400 500 200 -100 Asswne the firm's opportunity cost of capital is 12 per cent. (i) Find the discounted net present value of each project. (ii) Find the internal rate of return on each project. (iii) Which, if any, of the projects should the finn undertake? (iv) What assumptions must be made to answer question (iii)? (v) What would be the effect of choosing either project on the overall risk structure of the firm, given that the firm's existing projects are more risky than, and negatively correlated with, the new project? (vi) If the returns specified are in terms of constant prices in year 0, and the rate of inflation is 6 per cent, how is your answer to question (iii) affected?