Question 1 The directors of Fuseini Dauda Mining Company are currently considering two mutually exclusive investment projects. Both projects are concerned with the purchase of new plant and machinery. The cash flows for the projects are as follows:- Project 1 Project 2 OMR OMR Cost (immediate outlay) 100,000 60,000 Inflows Year 1 61,000 36,000 Year 2 30,000 15,000 Year 3 35,000 24,000 The company's estimated cost of capital is 10%. Required: a) Make use of the following to assess the two projects i) Payback, ii) NPV and iii) IRR methods b) Advise the directors as to which of the two projects they should invest and why. You should also state the strengths and limitations of the various methods. When calculating the IRR, make use of the 10% and 15% discount rates, as shown in the below. DO The hardese dehnstitute of erajfgement Accountants 2010 0.8264 0.7561 0.7513 0.6575 Formula. Approx. IRR = R1 + NPV, X (R2-R) (NPV: - NPV2) 2 3