1. A company is evaluating investment in the following two mutually exclusive projects: (3+5 marks) Project 2 13% Project 1 Required Return 13% Project Life (years) 4 Annual cash flows expected: Cost of the project 202,000 1 53,880 2 68,000 3 77,650 4 85,000 195,000 64,000 76,000 72,500 70,000 Show the necessary calculations: a. What is the payback period of the projects? Which project will the company choose? b. What is the NPV for each of the project? Which project will the company select the project if it applies the NPV decision rule? c. What is the IRR for each of the project? Which project will the company select the project if it applies the IRR decision rule? A. PAYBACK OF THE PROJECTS: What is the IRR of the projects? Which projects should be selected? Why NPV OF PROJECT 1 CASH PRESENT OF CASH INFLOWS INFLOWS YEAR NPV OF PROJECT 2 PRESENT OF CASH INFLOWS YEAR CASH IN FLOWS 1 1 2 2 3 3 TOTAL PRESENT VALUE OF CASH INFLOWS- TOTAL PRESENT VALUE OF CASH INFLOWS- IRR IRR