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Table -1- Cashflow Estimation Year 0 Year 1 Year 2 Year 3 Year 4 Year...

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Table -1- Cashflow Estimation Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Plant 1 Net Income $160,000 $180,000 $320,000 $465,000 $530,000 Depreciation (Straight-tine) Net Cash Flow $ 205,000 $210,000 $240,000 $370,000 $420,000 $ 205,000 190,000 $670,000 $720,000 -$1,000,000 $525,000 Plant 2 Net Income $430,000 $235,000 $150,000 $50,000 $50,000 $165,000 $175,000 $185,000 Depredation (Straight- line) Net Cash Flow $160,000 $160,000 $210,000 $210,000 -$900,000 $595,000 $410,000 $335,000 Required 1. Calculate the two projects' IRR. How should Saood convince the Board that the IRR measure could be misleading? (Marks 2.5) 2. Calculate the NPV for the two projects and explain the relevance using 10% as the discount rate. How should Saood convince the Board that the NPV method is the way to go? (Marks 2.5)

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