You work for a large company and your department is evaluating two mutually exclusive projects which are competing for the same investment capital.

The main objective is to maximise shareholder value.

You have been given the below information so far:

Project One Two

Payback Period $3$ years $4$ years

Accounting Rate of Return $10\%11\%$

Net Present Value at $5\%50,00055,000$

Net Present Value at $10\%(25,000)(10,000)$

Initial Outlay Required $60,00045,000$

Required:

a$)$ Calculate the internal rate of return for both projects and recommend which one of the projects should be undertaken.

b$)$ Discuss the limitation of the investment appraisal techniques and other factors that might be considered.