1. Identify the IRR problem for the cash flows given below and find the appropriate solution for the Modified IRR (no need to calculate the Modified IRR):

Years	Cash Flows
0	-100,000
1	50,000
2	60,000
3	-20,000
4	30,000

The appropriate discount rate is 15%.

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Part B

1. There are two capital structure combinations, given below. Do the followings

1. Calculate the empty cells.
2. Analyze the results in the Expected Scenario. Discuss the possible benefit due to leverage.
3. Work for Expansion (10% increased EBIT from Expected) and for Recession (10% reduced EBIT from Expected).
4. Plot the results in graphs, by plotting equity returns as dependent variable and EBIT as an independent variable.
5. Analyze the results in all possible scenario and conclude your discussion about the effects of financial leverage.

	Current	Proposed			No Debt	With Debt
Assets	10,000,000	10,000,000		EBIT as Expected	1,250,000	1,250,000
Debt	0	4,500,000		Interest
Equity				Net Income
Debtequity ratio				ROE
Share price	$25	$25		EPS
Shares Outstanding	500,000	250,000
Interest Rate	9%	9%

b. Discuss the MM proposition without taxes and with taxes. And relate its possible implication on Project Evaluation