###Question 7###

MNO Corporation is evaluating two investment options, Project 1 and Project 2. The expected net cash flows for each project are given below:

Projected Net Cash Flows (in thousands of dollars)

Year 0:

• Project 1: $(300)$
• Project 2: $(350)$

Year 1:

• Project 1: $90$
• Project 2: $100$

Year 2:

• Project 1: $100$
• Project 2: $120$

Year 3:

• Project 1: $110$
• Project 2: $140$

Year 4:

• Project 1: $120$
• Project 2: $160$

Year 5:

• Project 1: $130$
• Project 2: $180$

Requirements:

1. Calculate the Net Present Value (NPV) for each project using a discount rate of $7%$.
2. Determine the Internal Rate of Return (IRR) for each project.
3. Compute the Discounted Payback Period for each project.
4. Assess the risk of each project by analyzing the variability of cash flows.
5. Provide a recommendation on which project MNO Corporation should undertake.