1. Compare the two Mutually Exclusive Projects Below using Internal Rate of Return, Net Present Value and Payback as Criteria for Decision Making: Use three potential WACC:

Exhibit 1:

Expected Cash Flows

Year Project L Project S

0 -$1,000 -$2,000

1 200 700

2 300 500

3 850 330

a. What is the payback period for each Project?

Evaluate both projects at three different weighted average cost of capital:

b. Find the Internal Rate of Return (IRR)?

c. Find the Net Present Values (NPV) for each project at the three WACCs?

d. Which project would you ultimately choose and why (justify your answer)?