Consider the following two projects X and Y with initial investments of Kshs.240M and Kshs.360M respectively;

Project Cash Flows in Million

Year	X	Y
1	30	70
2	50	90
3	100	110
4	70	80
5	60	60
6	40	50

Using a minimum management rate of return of 12%

Required:

1. Explain the term Net Present Value (NPV) as a method of capital budgeting.
2. Calculate the NPV of both projects
3. Advise on the most preferred project to the management