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3. a) Vang Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the shorter payback, some value may be forgone. How much value will be lost in this instance? Note that under some conditions choosing projects on the basis of the shorter payback will not cause value to be lost. Calculate and comment on PBP and NPV decision criteria in this regard. (4+4+4+4+3 marks) WACC: 10.25% Year 0 1 2 3 4 CFs -$950 $500 $800 $0 $0 CFL -$2,100 $400 $800 $800 $1,000 b) Let's assume, the CEO believes the IRR is the best selection criterion where IRRL =9.71181%, IRRs = 12.24157%, while the CFO advocates the NPV. If the decision is made by choosing IRR rather than NPV, how much, if any, value will be forgone? i.e., what's the chosen NPV versus the maximum possible NPV? Note that (1) "true value" is measured by NPV, and (2) under some conditions the choice of IRR vs. NPV might have no effect on the value gained or lost. Comment on which project to be chosen based on IRR and why? (3 marks)