Question 1 (Total 17 marks) Shikongo Corporation is considering the purchase of one of three mutually exclusive projects for increasing production efficiency. The firm plans to use a 14% cost of capital to evaluate these equal-risk projects. The initial investment and annual cash flows over the life of each project are shown below. Project X Project Y Project Z Initial Investment $780,000 $520,000 $660,000 Year t Cash inflows CFt 1 $170,000 $280,000 $150,000 2 250,000 380,000 150,000 3 330,000 150,000 4 410,000 150,000 5 150,000 6 150,000 7 150,000 150,000 8 (a) Calculate the NPV for each project over its life. Rank the projects in descending order on the basis of the NPV. (10 marks) (b) Use the common life approach to evaluate the projects and rank them in descending order. (5 marks) (c) Compare and contrast your findings in (a) and (b). Which project would you recommend that the firm purchases? Why? (2 marks)