Calculate the restaurant project's net present value (NPV). (Ans: Net present value= $152,765)

The airport's Financial Director has provided the following taxation information: Tax depreciation: 25% reducing balance per annum. The first year's tax depreciation allowance is used against the first year's net cash inflows. Taxation rate: 30% of taxable profits. Half of the tax is payable in the year in which it arises, the balance is paid the following year. Any taxable losses resulting from this investment can be set against profits made by the airport company's other business activities since the airport company is profitable. The airport company uses a post-tax cost of capital of 8% per annum to evaluate projects of this type. Ignore inflation. Required: (a) Calculate the restaurant project's net present value (NPV). (Ans: Net present value= $152,765) (b) The company's Managing Director has been presented with the details of three potential investment projects. He has very little experience of project appraisal and has asked you for help. The project details are given below:- Project A Project B Project C Expected NPV $150,000 $180,000 $180,000 Standard Deviation of Expected NPV $10,000 $50,000 $30,000 IRR 12% 12% 10% The three projects will require the same level of initial investment. The projects are mutually exclusive; therefore, the Managing Director can only choose one. Required: Interpret the information for the Managing Director (your answer should include an explanation of the factors he should consider when deciding which project to undertake)