Question 42 Not yet saved Not graded Flag question Question ID: 559 This question is worth 10 marks in total. This is a written calculation question, and you should perform the necessary calculations/working on paper to later be scanned and uploaded. Start a new page for this question. For dollar amounts, give your answer to the nearest cent. For interest rates, give our answer as a percentage rounded to 2 decimal places. If any parts of the question use values from earlier parts, use the EXACT values from earlier parts. QUESTION START ABC Co. is considering two mutually exclusive projects with the same cost of capital of 12%. The estimated net cash flows are as follows: Year Project X Project Y 0 -$500 -$450 1 $320 $280 2 $230 $600 3 $500 -$150 a) Calculate the payback period for each project. Give your answer in years, to 2 decimal places. (2 marks) b) Discuss two problems of using payback period in capital budgeting decisions in the context of Projects X and Y. (2 marks) c) Calculate the NPV for each project. Explain which project, if any, you would choose using the NPV criterion. (3 marks) d) Explain why the NPV method is the recommended approach among different capital budgeting measures. (2 marks) e) Discuss the practical issues associated with the choice of cost of capital for the NPV method. (1 mark) f) Give 2 reasons why investment projects may be mutually exclusive in practice. (2 marks)