31. Your company is evaluating three projects and has a development budget of $3,000,000 this year. All 3 projects will fully expend their development costs this year.

Project 1 has an expected development cost of $3,000,000. Project 2 has an expected development cost of $2,500,000. Project 3 has an expected development cost of $500,000.

The interim cash flows for Project 1 are $400,000 per year for 5 years. The Project is expected to have an ongoing value at the end of 5 years of $4,000,000.

There are no interim cash flows expected for Project 2, but it is expected to be worth $5,000,000 at the end of the third year.

The interim cash flows for Project 3 are $125,000 per year for 4 years. The Project is expected to have a salvage value at the end of 4 years of $100,000.

Your company evaluates Projects based on a 10% require rate of return.

I. Based strictly on the present values for the three projects, what is the best value for the company: (10 points) a. Develop Project 1 only b. Develop Project 2 only c. Develop Projects 2 and 3 d. Do not develop any of the Projects

II. What project(s) would you recommend going forward with? Briefly explain. (5 points)