$1.$ RAK Investments plc is looking to take on a new investment. The company will evaluate two mutually exclusive projects, whose details are given below. The company$$s cost of capital is $9\%.$

BD Millions Project A Project B

Initial Investment $(105)(128)$

Year $14080$

Year $25060$

Year $36050$

Year $45020$

Year $57510$

Calculate the Payback period

Calculate the Net Present Value $($NPV$)$ of both projects

Calculate the Internal Rate of Return $($IRR$)$ of both projects $(12$ marks$)$

$2$b$.$ Critically discuss the merits of each investment appraisal method, then discuss the result of the evaluations you have made of the two projects and advise the company which project should be undertaken $(10$ marks$)$

marks$)$