Your client, Mr Imtiaz Khan is assessing two different types of 4-year mutually exclusive investments. From his analysis, he anticipates generating future end-of-year cash flows arising from each of the investment as follows: Year Investment A, (CFs in AUD) Investment B (CFs in AUD) 0 -250 000 -130 000 1 35 500 30 000 2 35 000 42 500 3 18 500 39 000 4 450 000 160 500 The applicable discount rate for both these two investments is 15%.

2.1 Calculate the Net Present Value (NPV) and Internal Rate of Return (IRR) of both investments A and B. 2.2 It is often considered best practice to use more than one investment criterion/technique to evaluate investment opportunities. Discuss two reasons why it is important to make well-informed and accurate investment decisions. 2.3 Which investment criterion (technique) is considered the best criterion to follow? Explain your answer. 2.4 Which investment would you advise your client to proceed with? Motivate your answer.