2. Projects X and Y have the following expected net cash flows: (7)

Project X Project Y

Year Cash Flow Cash Flow

0 -$600,000 -$600,000

1 350,000 350,000

2 350,000 350,000

3 350,000 300,000

4 150,000 200,000

5 150,000

Both the projects are of the same company, cosmo Pharma. The cost of capital is 17%

Assume you are a finance manager of the company. Which project you should Choose based on NPV? Would your decision change if the payback method was used? Or Discounted Payback period?

Which method you think is the best to find out the solution and why? Why you are not choosing the other two methods?