Question: Problem:A carmaker is expecting to create a new car.There are 3 possible different cars, with different investment and different time of production:Investment in million FCFF

Problem:A carmaker is expecting to create a new car.There are 3 possible different cars, with different investment and different time of production:Investment in million FCFF in milliont=0t=123456Speedy A-704545Family B-120303030303030Truck C-503631Assume that the firm gives up project C, so it must compare A and B for a 6-year project:a/ Which project, A or B, provides a better NPV?Cost of capital = 8%Risk-free rate = 3% (As mentioned in class you do not have to use the risk-free rate)b/ What is the equivalent annual annuity for each project?Assume that the firm gives up project B and it must compare A and C for a 2-year project:c/ Draw the NPV profile with A and C.d/ If the cost of capital is 8%, which project is better? No calculation but show on the graph.Question:Looking at the problem above, you selected the projects depending on your calculation. Whatissues may change your mind without any change in calculation? Explain why you could do the opposite section?

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