Your division is considering two investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows:

Year				Project L				Project M
1				5,000,000				20,000,000
2				10,000,000				10,000,000
3				15,000,000				8,000,000
4				20,000,000				6,000,000

a). What is the regular payback period for each of the projects?

b). What is the discounted payback period for each of the projects?

c). If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake?

d). If the two projects are mutually exclusive and the cost of capital is 5%, which project should be undertaken?

e). If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?

f). If the cost of capital is 10%, what is the modified IRR of each project?