You are considering the following two mutually exclusive projects. The required return on each project is 14 percent.

(i) Calculate the Payback period of both projects. (2 marks)

(ii) State two advantages and two disadvantages of Payback period rule? (2 marks)

(iii) Calculate the IRR of both projects. (2 marks)

(iv) Under what circumstances IRR may generate wrong decision? (3 marks)

(v) Calculate the NPV of both projects (2 marks)

(vi) Which project should you accept and what is the best reason for that decision? (2 marks)