Megah Holding is considering mutually exclusive project. It requires an initial cash outlay of RM 10,000 and has a life of four years. The companys cost of capital is 12%. The expected cash flows to be generated by the projects as shown in table 1. Arianna Shira is a financial manager of the company. She needs to evaluate and analyzed both projects. The cost of capital is 12% and expected cash flows for each project are given as follows:

Year PROJECT A (RM) PROJECT B (RM)

0 10,000 10,000

1 7,000 4,000

2 3,500 4,000

3 3,000 4,000

4 1,500 4,000

1. Calculate the followings:

1. Payback period for the two projects. (4 marks)

2. Net Present Value for the two projects. (6 marks)

3. Internal rate of return for Project B only. (5 marks)

4. Which project would be selected and state your reasons? (4 marks)

5. What does the term 'mutually exclusive' mean? If Project A and B are unrelated project, which project would be selected and state the reason. (6 marks)