OBIBA Company Ltd is considering which of two mutually exclusive projects it should

undertake. OBIBA Company Ltd has a policy of discounting cash flows at 15% per annum.

The company projects the free cash flows (in Cedis) of the two projects as follows:

Year

Project A

(293)

45

125

140

110

30

Project B

(200)

120

40

40

15

80

Required:

Calculate the Net Present Value (NPV), the Profitability Index (PI), and the Modified

Internal Rate of Return (MIRR) of each project.

[15 Marks]

b.

Recommend with reasons, which project OBIBA Ltd should undertake.