Consider the following two mutually exclusive projects, X and Y, and their cash flows information,

Cash Flows Project Year 0 Year 1 Year 2 Year 3 Year 4

X ($2,600) $1,000 $1,300 $ 800 $ 400

Y ($3,100) $ 900 $1,500 $1,100 $ 800

(a) Assume that the appropriate discount rate is 14%:

1.calculate the Payback Period,

2.the Modified IRR (McKinseys approach)

3.the Profitability Index for Project Y.

4.State clearly the key piece of information that you need in order to make the correct investment recommendation on the two projects according to the Payback Period method.