Reynolds Enterprises has a $30 million capital budget and must make decisions regarding investment projects for the coming year. Projects 1 and 2 are mutually exclusive. Project 3 is independent of the other two. Suppose the cost of capital for Reynolds Enterprises is 15%. Project 1 Project 2 Project 3 Initial cash outflow -$15,000,000 -$30,000,000 -$15,000,000 Year 1 cash inflow $12,000,000 $12,000,000 $9,100,000 Year 2 cash inflow $6,000,000 $10,000,000 $9,100,000 Year 3 cash inflow $5,000,000 $24,000,000 $9,100,000 NPV IRR PI (i) Use the information on the Projects 1 and 2 (the mutually exclusive projects) to determine which of them should be accepted on the basis of Net Present Value (NPV). (Marks: 2) (ii) What is the Internal rate of return (IRR) and Profitability Index (PI)? Which of the two mutually exclusive projects should be accepted based on IRR and PI? (Marks: 2) (iii) Briefly explain why NPV, IRR and PI can sometimes produce a different ranking of projects. (Marks: 3) (iv) Suppose Project 3, the independent project also becomes available. Which projects should be accepted by Reynolds Enterprises? Is the better technique in this situation NPV, IRR or PI? Why?