1. Analyze these two proposed capital investments, Projects X and Y. Eachproject has a cost of $10,000, and the cost of capital for each is 10%. The projectsexpected net cash flows are as follows:

Calculate each projects payback period, net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI).Which project or projects shold be accepted if they are independent?Which project should be accepted if they are mutually exclusive?How might a change in the cost of capital produce a conflict between the NPV and IRR rankings of these two projects? Would this conflict exist if r were 5%? (Hint: Plot the NPV profiles.) Why does the conflict exist?

Expected Net Cash Flows Year Project -$10,000 6,500 3,000 3,000 Project Y $10,000 3,500 3,500 3,500 3,500 Expected Net Cash Flows Year Project -$10,000 6,500 3,000 3,000 Project Y $10,000 3,500 3,500 3,500 3,500