Assume that you are hired as a financial analyst for the DFML Company. The director of capital

budgeting has asked you to analyze two proposed capital investments, Projects A1 and B2. Each

project has a cost of Rs.10,000, and the cost of capital for each is 12%. The projects' expected

net cash flows are as follows (10)

Year Project A1 (Rs.) Project B2(Rs.)

0 (10,000,000) (10,000,000)

1 6,500,000 3,500,000

2 3,000,000 3,500,000

3 3,000,000 3,500,000

4 1,000,000 3,500,000

1: Calculate each project's

a. Payback period,

b. Net present value (NPV),

c. Internal rate of return (IRR),

d. Profitability index (PI).

2: Which project or projects should be accepted if they are independent?

3: Which project should be accepted if they are mutually exclusive?