Discussion Problem: Your boss, the chief financial officer (CFO) for Southern Textiles, just handed you the estimated cash flows for two proposed projects. Project F involves adding a new item to the firm's fabric line. It would take some time to build up the market for this product, so the cash inflows would increase over time. Project N involves an add-on to an existing line, and its cash flows would decrease over time. Both projects have three-year lives because Southern is planning to introduce an entirely new fabric in three years. Following are the net cash flow estimates for Projects F \& N: The CFO also made subjective risk assessments of each project, and he concluded both projects have risk characteristics that are similar to the firm's existing assets. Southern's required rate of return is 10 percent. You must now determine whether one or both projects should be accepted. Start by answering the following questions: Question 1: (a) What is capital budgeting? (b) What is the difference between independent and mutually exclusive projects? Question 2: (a) Define the term Net Present Value (NPV). Based on the above net cash flow estimates calculate each project's NPV? (b) Define the term internal Rate of Return (IRR). Based on the above net cash flow estimates calculate each project's IRR