Barona Corp. is considering five projects in five different industries. The firm will use industry average beta to evaluate the projects. The table below shows the initial capital $($Io$)$ or investment outlay of each project in $ million, the annual free cash flows to the firm, $($FCFF$)$ in $ million, economic life, N$,$ in years, the average industry beta $($Beta$),$ the average industry capital structure defined by debt$-$to$-$equity $($D: E$)$ ratios $($by market values$)$ and the corresponding debt$-$to$-$equity ratio financing of each project.

Project Initial cost $($$ million$)$ Annual FCF $($$ million$)$ Economic life $($years$)$ Average industry beta Average industry D:E ratio Project D:E ratio

A $24067\mathrm{.}4051\mathrm{.}59401\mathrm{.}000\mathrm{.}4$

B $15052\mathrm{.}5441\mathrm{.}88641\mathrm{.}500\mathrm{.}9$

C $300185\mathrm{.}3120\mathrm{.}63680\mathrm{.}674\mathrm{.}0$

D $36091\mathrm{.}5960\mathrm{.}75000\mathrm{.}200\mathrm{.}2$

E $15062\mathrm{.}9931\mathrm{.}26800\mathrm{.}550\mathrm{.}6$

The risk$-$interest rate is $3\%$ while the average market return is $10\%.$ Assume a corporate tax rate of $30\%.$ Irrespective of which project is undertaken, the firm can raise new debt capital at $2\%$ above the risk$-$free rate.

Required:

$($i$)$ Assume the projects are independent and the firm does not have capital constraint $($it can undertake all projects$),$ rank the projects in order of their viability. Show all your computations. Hint: Compute the alpha value of each project. The expected returns is each project$$s internal rate of return $($IRR$).(10$ points$)$

$($ii$)$ Assume the projects are mutually exclusive. Rank them in order of their viability. Which project would you undertake? $(9$ points$)$