A firm plans to expand its existing business and, thus, invest in a new project. The “Initial Cost” on and the expected future “Net Cash Flows” from Project X and Project Y are given in the table below.

Item	Project X	Project Y
Initial Cost	20000	20000
Net Cash Flows
Year 1	1000	-2000
Year 2	3000	4000
Year 3	8000	10000
Year 4	12000	14000
Year 5	16000	20000

  1.Use the Net Present value (NPV) method to determine which of the two projects the firm should choose to invest in if the discount rate is 4.5% per annum. State your reason/s.

2.After the first year of the project, if the  discount rate has increased to 5%  per annum, calculate the new NPV for the two projects.   

3.Find the IRR for project X and Y, which project would you choose to invest in?  State the reason/s for your decision.