question B

Question 5: Mutually Exclusive Projects You are considering two mutually exclusive investment projects, X and Y, with initial outlays and cash inflows as follows Project X ProjectY Year 0 $1,000 S100 S300 S400 $700 $1,000 S1,000 $100 S50 S50 4 The projects are equally risky and the cost of capital (or discount rate) for both projects is 12% p.a a)Answer this part of the question without performing any calculations. Suppose you are to use the internal rate of return (IRR) rule to choose between the two projects. Will the use of the IRR rule in this case provide an unambiguous and correct decision? Briefly explain. (5 marks) b) Which project should be chosen under the modified IRR (MIRR) rule? Show your workings. (10 marks)