Financial manager has responsibility to perform various financial decisions of any business company. Suppose you are BBA graduates from Tribhuvan University with finance specialization. Kathmandu…

Financial manager has responsibility to perform various financial decisions of any business company. Suppose you are BBA graduates from Tribhuvan University with finance specialization. Kathmandu Manufacturing Company (KMC) has just appointed you as financial manager and your responsibilities are to make financial planning and forecasting, capital investment, financing, working capital and dividend decisions, dealing with financial markets, managing financial risk, controlling of financial resources etc. At present, the Chief Financial Officer (CFO) of KMC asks you to analyze two proposed projects: Project A and Project B with their expected cash flows for the sound capital investment decisions. Initial cost of each project is Rs 1,000,000. The cost of capital of each project is 10 percent. The expected net cash flows of each project are as follows: YearCash Flow of Project A (Rs)Cash Flow of Project B (Rs)0(1,000,000)(1,000,000)1700,000950,0002700,000750,0003700,000300,000 Based on the above information, you are asked to answer the following questions: a. Calculate payback period of each project. b. Calculate net present value (NPV) of each project. Which project/projects should be accepted based on NPV if projects are independent? c. Calculate internal rate of return (IRR) of each project. Which project should be accepted based on IRR if projects are mutually exclusive? d. What are the merits and demerits of payback period, net present value, and internal rate of return?