Question: Your company is considering two projects, Project M and Project N, each of which requires an initial outlay of 50 million. The expected cash inflows

Your company is considering two projects, Project M and Project N, each of which requires an initial outlay of ₹50 million. The expected cash inflows from these projects are:

Year

Cashflow (in millions)

Project M

Project N

1

11

38

2

19

22

3

32

18

4

37

10

  1. What is the payback period for each of the projects?
  2. What is the discounted payback period for each of the projects if the cost of capital is 12 percent?
  3. If the two projects are independent and the cost of capital is 12 percent, which projects (s) should the firm invest in?
  4. If the two projects are mutually exclusive and the cost of capital is 10 percent, which project should the firm invest in?
  5. If the two projects are mutually exclusive and the cost of capital is 15 percent, which project should the firm invest in? ON EXCEL
  6. If the cost of capital is 14 percent, what is the modified IRR of each project?

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