1. 2.

Solution 1
a. Payback period: This technique helps in identifying the number of years the cash flow of the project will take to pay off the initial investment. On the basis of this technique, the project having less payback period as compared to tenure of project will be selected. The demerit of this method is not to consider the discounting factor over the time period of the project.
b. Internal rate of return (IRR): Under this technique, the current value of inflows are equated with current value of outflows or the rate at which both cash inflows and outflows are equated by discounting with this rate. On the basis of the internal rate of return the project having IRR higher than the required rate of return will be selected. The demerits of IRR is that it ignores the inflation rate...