Mr. X is considering two projects, A & B, with cash flows as shown below: 10 Marks

period	Cash Flow of
	Project A	Project B
0	-90,000	-150,000
1	30,000	72,000
2	30,000	35,000
3	30,000	40,000
4	30,000	25,000

a. Calculate discounted payback period, net present value and internal rate of return for each project using opportunity cost of capital 13 % & 9% for project A & B respectively.

b. Which project(s) should be accepted if :

(i) The projects are mutually exclusive and there is no capital constraint.

(ii) The projects are independent and there is no capital constraint.

(iii) The projects are independent and there is a total of $100,000 of financing for capital outlays in the coming period.

c. Why the cost of capital for A might be higher than for B. State possible reason(s)