FINA 3562 Project 3 Learning objective: Students will learn how to use different methods to evaluate investment proposals. Requirements: Please analyze the following problem and answer questions by deriving the solutions in Excel spreadsheets. You can use Project 3 Format.xlsx to work on this project. This file is available on Blackboard. Please set formulae by referencing to the data in Excel spreadsheets. If you do not meet this requirement, you will be asked to re-work on the project. This project accounts for 6% of your overall grade. Due date: December 1st, 11:59 pm on Blackboard Problem: AZM Inc. is evaluating two mutually exclusive projects of making two types of SUVs: mini-SUV, and full- SUV. Assume the discount rate for both projects is 10 percent. The costs of investment and projected cash flows for both projects are given in the following table: Year AZM MINI-SUV AZM FULL-SUV -$650,000 -$975,000 $330,000 490,000 $310,000 460,000 $260,000 410,000 0 1 2 3 Questions 1. What is the payback period of each project? Based on the payback period, which project should be taken? 2. What is the profitability index of each project? Based on the profitability index, which project should be taken? 3. What is the internal rate of return (IRR) of each project? Based on the IRR, which project should be taken? 4. What is the net present value (NPV) of each project? Based on the NPV, which project should be taken?? For additional reference, you can review Examples 3, 17, 19, and 20 in Chapter 20 Examples.xlsx posted on Blackboard for how to compute the payback period, profitability index, IRR and NPV. 1 fx A B D E F G 0 1 2 3 Year Mini-SUV Cash flows Full-SUV Cash flows 10% Required return (used as the discount rate) Part 1: Mini-SUV Initial cash outlay Accumulated cash inflows Payback period Full-SUV Initial cash outlay Accumulated cash inflows Payback period Which project should be taken? Part 2: Mini-SUV Present value of cash inflows Present value of cash outflows Profitability index Full-SUV Present value of cash inflows Present value of cash outflows Profitability index Which project should be taken? Part 3: Mini-SUV Internal rate of return (IRR) Full-SUV Internal rate of return (IRR) Which project should be taken? Part 4: Mini-SUV Net present value (NPV) Full-SUV Net present value (NPV) Which project should be taken