Please provide detailed calculation procedures. If you use excel, please also submit your excel file within 10 minutes of your exam submission. There is a dropbox link under this exam. Late submission will not be accepted.

The director of capital budgeting for a firm has identified two projects, A and B, with the following expected net cash flows:

Expected Net Cash Flows

Year Project A Project B

0 - $223 -$324

1 93 120

2 83 140

3 70 158

4 63 188

Please use the WACC from Q1 part d in this question.

Part a. What is Project A's and Project Bs discount payback (DPB)?

DPB for A = ____________.

DPB for B = ______________.

Part b. What is the profitability index (PI) for Both Projects? (10 points)

Profitability Index for A = ____________.

Profitability Index for B = _____________.

Part c. What is the internal rate of return for Both Projects?

IRR for Project A = _____________.

IRR for Project B = ______________.

Part d. Based on your findings above, what should the company do if both projects are independent to each other? Why? What if both projects are mutually exclusive?

WACC=38.5%*11.22%+61.54%*9.09%*(1-29.5%) = 8.26%