Question 1 (30 marks) Suppose Pfizer and BioNTech have the following two mutually exclusive development plan for new laboratories and research centers, Project A and Project B. The financial teams have prepared estimates of the initial investment, evaluation of the two possibilities produces the following cash flows and internal rates of return (IRR), they are shown in the table below. The financial managers believe that the two plans carry similar risks and the acceptance of either of them will not change the group's overall risk. With the tight timeline, the group only accepts projects that can be paid back up to 2.5 years. Suppose the companies requires a return of 12% on the development plans. Year 0 Project A (US$ in thousand) (75,000) 32,400 30,200 1 Project B (US$ in thousand) (38,000) 17,800 14,200 19,800 16.92% 2 3 36,600 15.06% IRR (1) Based on your answers in parts (1) through (iv), which project will you finally recommend? Explain. (7 marks) (vi) Suppose Pfizer has several positive net present value projects that would like to pursue and thus decided to issue additional shares of common stock. As a result of this stock issue, the firm's stock price declined. Explain why this occurred when the proceeds of the issue are being used to fund positive net present value projects. (10 marks)