1. Beta Manufacturing PLC. is planning to invest in one project. They have got two projects for consideration, Project A and Project B, with unequal life spans. Shown below are the net cash flows associated with each project. Period 0 1 2 3 4. Cash Flow (Rs. '000s) Project A Project B -60,000 -110,000 30,000 20,000 25,000 25,000 60,000 25,000 20,000 In addition to the above cash flows, commencement of Project A and Project B requires an increase in working capital of Rs.7.0 million and Rs. 6.0 million, respectively. The opportunity cost of capital for project A is 14 percent. The opportunity cost of capital for project B is 10 percent. third year. i. Select the best project based on net present value of each project. (06 Marks) ii. Select the best project based on internal rate of return of the projects. (10 marks) iii. Which project should be accepted in each of the following situations: (a) The projects are mutually exclusive and there is no capital constraint. (03 marks) (b) Beta Manufacturing PLC. expects to recover their investments before the end of (05 Marks) (c) Beta Manufacturing PLC. only prefers the projects with highest net benefit to their investment (08 Marks) iv. Explain the possible reasons for why the cost of capital requirement for Project A is higher than that of Project B. (03 Marks) What will be the risk of making the investment decision based only the above methods in appraising these projects? Discuss. (05 Marks) 1 V