Question#4: A firm is considering the following two projects:

PROJECT-A CASH FLOWS		PROJECT-B CASH FLOWS
YEARS	CASH FLOWS	YEARS	CASH FLOWS
0	(Rs.4,500.00)	0	(Rs.4,000.00)
1	Rs.600.00	1	Rs.800.00
2	Rs.800.00	2	Rs.950.00
3	Rs.1,000.00	3	Rs.1,080.00
4	Rs.1,200.00	4	Rs.1,220.00
5	Rs.1,400.00	5	Rs.1,500.00
6	Rs.1,500.00	6	Rs.1,000.00
7	Rs.1,600.00	7	Rs.800.00

Required:

4(a). Calculate the Payback Period in years for both projects.

4(b). Calculate NPVs for both projects.

4(c). Calculate IRRs for both projects.

4(d). On the basis of the calculated Payback Period, NPVs, and IRRs above, decide which project should be selected by the firm.

Please note: Assume the discount rate to be at 12% for the above question.