Consider the following two projects: X and Y$.$ Using a discount rate of $4\%,$ calculate the

Net Present Value $($NPV$)$ and Profitability Index $($PI$)$ for each project. If there is a

constraint on capital which project should you chose and why? How would your

answer change if there was no capital constraint? $(15$ marks$)$

Time period Project A $()$ Project B $()$

$0-100,000-100,000$

$145,00020,000$

$260,00040,000$

$310,00050,000$

b$.$ Recalculate the NPV of each investment using a discount rate of $8\%.$ When calculating

net present value, why do you get different preference depending on the discount

rate used?