i.If you can invest in two mutually exclusive expansion projects. Project A requires a Rs.40 million expenditure that would provide expected cash flows of Rs.6.4 million per year for 20 years. Project B requires a Rs.12 million expenditure with expected cash flows of Rs.2.72 million per year for 20 years. The discount rate is 10%.

a. Calculate each project's NPV and IRR.

b. Why is NPV better than IRR for making capital budgeting decisions that add to

shareholder value?

ii.Following data is provided for two plants. Discount rate is 14%

Year

Plant X

Plant Y

0

-4000

-14000

1

1500

3600

2

1500

3600

3

1500

3600

4

1500

3600

5

1500

3600

a. Calculate NPV, IRR, payback, and profitability indext for each project.

b. Assuming the projects are independent, which one(s) would you recommend?