5. Steers is evaluating two competing investment projects. Both projects require an investment of R30 million. The company cost of capital is 12 percent for projects of this type. The expected cash flows are as follows:

Project 1Project 2End-of-year 1R 3 millionR 12 millionEnd-of-year 2R 5 millionR 9 millionEnd-of-year 3R 8 millionR 7 millionEnd-of-year 4R 10 millionR 4 millionEnd-of-year 5R 13 millionR 3 millionTotal cash flows R 39 million R 35 million

Required:

5.1. Which of the two projects would you recommend? Why?

5.2. Will your choice be the same, whatever the cost of capital?