Q4. CUI firm has to choose between two possible projects and the details of each project are as follows: The initial investment (capital cost) is 750 ($000) for project A and 650 ($000) for project B. Assume a required rate of return of 12.5 % for both the projects. Calculate DCF for two projects and based on DCF result suggest which project firm should opt and give reason why.

Net Cash Inflow ($000)

Project A Project B

Year 1 204.19 158.41

Year 2 282.58 240.89

Year 3 174.49 194.85

Year 4 199.43 278.59

Year 5 286.41 304.27