A company has a 12% WACC. One of its core divisions is considering two mutually exclusive investments with the net cash flows given below. The divisions beta is DIV = 1.6, risk free rate is kRF = 7% and risk-premium on the market is RPM = 6%

Year Project A Project B 0 -$1000 -$1000 1 $200 $800 2 $700 $600 3 $600 $250 4 $800 $134 5 -$300 $134 6 $250 $150

Given the information above, you are required to answer the followings: i. What is each projects Payback and discounted payback periods and interpret these numbers? ii. What is each projects NPV? iii. What is each projects IRR? iv. What is each projects MIRR? v. From your answers to Parts a, b, c and d, which project would be selected? vi. What is each projects profitability index? vii. What is difference between mutually exclusive and independent projects? viii. List the characteristics of a good capital budgeting technique. ix. Briefly explain the acceptance and rejection criteria for each technique regarding mutually exclusive and independent projects.