You have a $10 million capital budget and must make the decision about which investments your fi rm should accept for the coming year. Use the following information on three mutually exclusive projects to determine which investment your fi rm should accept. The fi rm’s cost of capital is 12 percent. Cash Flows Project 1 Project 2 Project 3 Initial Cash Outfl ow –$4,000,000 –$5,000,000 –$10,000,000 Year 1 cash infl ow 1,000,000 2,000,000 4,000,000 Year 2 cash infl ow 2,000,000 3,000,000 6,000,000 Year 3 cash infl ow 3,000,000 3,000,000 5,000,000 a. Which project do you accept on the basis of NPV? b. Which project do you accept on the basis of PI? c. If these are the only investments available, which one do you select?