Decision Rule Conflict. Bob Sponge has been retained as a management consultant by Square Pants, Inc., a local specialty retailer, to analyze two proposed capital investment projects, projects X and Y. Project X is a sophisticated working capital and inventory control system based upon a powerful personal computer, called a system server, and PC software specifically designed for inventory processing and control in the retailing business. Project Y is a similarly sophisticated working capital and inventory control system based upon a powerful personal computer and general- purpose PC software. Each project has a cost of $10,000, and the cost of capital for both projects is 12%. The projects= expected net cash flows are as follows:\ \ \ \ \ Expected Net Cash Flow\ \ \ \ Year\ \ Project X\ \ Project Y\ \ 0\ \ ($10,000)\ \ ($10,000)\ \ 1\ \ 6,500\ \ 3,500\ \ 2\ \ 3,000\ \ 3,500\ \ 3\ \ 3,000\ \ 3,500\ \ 4\ \ 1,000\ \ 3,500\ \ \ \ \ \ A. Calculate each project=s nominal payback period, net present value (NPV), internal rate of return (IRR), and profitability index (PI).\ \ \ \ B. Should both projects be accepted if they are interdependent?\ \ \ \ C. Which project should be accepted if they are mutually exclusive?\ \ \ \ \ \ \ \ \ \ \ \ D. How might a change in the cost of capital produce a conflict between the NPV and IRR rankings of these two projects? At what values of k would this conflict exist? (Hint: Plot the NPV profiles for each project to find the crossover discount rate k.)\ \ \ \ E. Why does a conflict exist between NPV and IRR rankings?