You are a financial analyst for the wakulima limited. The finance director has asked you to analyze two proposed capital investments, Projects X and Y. Each project has a cost of sh 1,000,000, and the cost of capital for each project is 10 percent. The projects' expected net cash

flows are as follows:

Expected Net Cash Flows

YearProject XProject Y

0(1,000,000)(1000,000)

1650,000350,000

2300,000350,000

3300,000350,000

4100,000350,000

a. Calculate each project's payback period, net present value (NPV), internal rate of return (IRR), and modified internal rate of return (MIRR).

b. Which project or projects should be accepted if they are independent?

c. Which project should be accepted if they are mutually exclusive?

d. How might a change in the cost of capital produce a conflict between the NPV and IRR rankings of these two projects? Would this conflict exist if r were 5%? (Hint: Plot the NPV profiles.)

e. Why does the conflict exist?