PLEASE ANSWER THE QUESTION BELOW :

Moon and Stars Limited is an international producer of space gear. The company is based on the planet of Confused in the Lost and Found Galaxy.

The company is approaching the end of its financial year, and the board of directors are seeking to decide on the capital budget for the forthcoming year, and the capital expenditure items the company may invest into.

The chief financial officer (CFO) has presented the board with the following list of four major capital expenditure projects for consideration with the initial outlay and projected annual after-tax cash flows for each project.

	Project B	Project R	Project V	Project E
Initial Outlay	$66,000.00	$44,000.00	$48,000.00	$82,000.00
Life of Project	3 Years	4 Years	3 Years	5 Years
Annual After-Tax Cash Flow
Year 1	$28,000.00	$11,000.00	$29,000.00	$31,000.00
Year 2	$38,000.00	$9,000.00	$19,000.00	$21,000.00
Year 3	$16,000.00	$36,000.00	$12,000.00	$25,000.00
Year 4		$15,000.00		$15,000.00
Year 5				$29,000.00

The cost of capital is 8.50%.

Required:

(1) Calculate the profitability index value for Project B. Would Project B be accepted (ignore all other projects)?

(2) Calculate the discounted payback period for Project V. The company requires a minimum accounting payback period of 2.65 years. Would Project V be accepted (ignore all other projects)?

(3) Assume that the company has a capital budget of $69,000 for the forthcoming year. Also, assume that the company can only select from Project B and Project V. These projects are assumed to be independent. Calculate the NPV of each and based on that project (or projects) should the company select. Justify your answer.

(4) Assume company wish to select between Project R and Project E. Both projects are mutually exclusive. Based on appropriate calculation techniques, which project would be selected. Show all calculations.