MNBC plc are considering launching two mutually-exclusive projects with the following details: Details Project X Project Z Initial Investment $655,000 $725,000 Scrap value in year 5 $50,000 $25,000 Annual regular Cash flow Year 1 $175,000 $265,000 Year 2 $175,000 $255,000 Year 3 $175,000 $230,000 Year 4 $175,000 $175,000 Year 5 $225,000 $135,000 Assumption: - Initial investment is at the start of the project - There is zero inflation - There is zero taxation - Annual cash flows are at the end of each year. - Cost of Capital (Discounted factor) 10% per annum. Required: (a) Regarding the above information calculate the following using the spread sheet, Show all your workings and formulae: (i) Net present value (NPV); (15 marks) (ii) Payback Period (Discounted and non-Discounted) (5 marks) (iii) Internal Rate of Return (5 marks) (iv) Accounting Rate of Return (ARR) (5 marks) (b) Explain advantages, disadvantage and decision criteria for each of the following methods use for Capital budget analysis. (i) Net present value; (5 marks) (ii) Payback Period (Discounted and non-Discounted) (5 marks) (iii) Internal Rate of Return (5 marks) (iv) Accounting Rate of Return (ARR) (5 marks) 5 | P a g e (c) Discuss the advantages and disadvantages of raising debt finance rather than equity finance. (10 marks)