Please include the formulas you use to solve each question.

4) (7 marks) A business is looking at making a substantial investment in one of its business lines. They are looking at making an initial investment today of $300,000 and another investment at the end of year 2. The expected incremental net cash flows from this investment are as follows; End of year Today Year 1 Year 2 Year 3 Year 4 Year 5 -300,000 54,000 - 150,000 90,000 90,000 630,000 a) (3 marks) The cost of capital is i =10%. Calculate the NPV. b) (4 marks). The calculated IRR is 19.1%, but the CFO has cautioned against making a decision solely on this result, and so has calculated a modified internal rate of return (MIRR) assuming a financing rate of 10% and a reinvestment rate of r =7.5%. (i) (1 mark) What is the reason for the CFO's caution? (ii) (3 marks) Calculate the MIRR. What is your recommendation and why