Question: XYZ Construction is considering two projects to develop. The expected cash inflows are as follows : Project M Project N Year 110,00025,000 Year 215,00025,000 Year

XYZ Construction is considering two projects to develop. The expected cash inflows are as follows :

Project MProject N

Year 110,00025,000

Year 215,00025,000

Year 3 20,00025,000

Year 425,00025,000

Year 530,00025,000

Each Project requires an investment of $100,000. A rate of 10% has been selected for the

NPV Analysis.

Required :

a)Calculate the NPV and the Profitability Index and suggest which project should be

recommended based on each method.

b)Explain what are the key decisions a Finance Manager has to take in an

Organization with suitable examples.

Write short note on the following Financial Management Axioms :

a)Risk - return trade off

b)Cash is King.

c)Incremental Cash flows count

d)The agency problem

e)Ethical decisions are everywhere in Finance

f)Efficient Capital markets.

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