1. Compute the internal rate of return and the net present value for each of these four proposals.

The Initial Decision After receiving the input from her boss and the three division heads, Ann Martin decided to go with the following system. The weighted average cost of capital of 12 percent forthe entire corporation would be the staffing point for the corporation. The airline pans manufacturing division would continue to use 12 percent as its discount rate. Because firms comparable to the auto airbags production division had an average beta* of .8 and the division itself had fewer variable eamings from year to year than the corporation, it would be assigned a discount rate of 10 percent. The head of the aerospace division was displeased to be assigned a discount rate of 15 percent. Ann Martin justified the high hurdle rate based on an average beta of 1.35 in the aerospace industry and the highly risky business of dealing with the govemment. Contracts were often cut back when a new administration came into power. Application of Divisional Hurdle Rates: _ The application of the new system got its first test when the auto airbags production division and the aerospace division simultaneously submitted four proposals. Proposal A The auto airbags production division submitted a proposal for a new airbag model that would cost $2,355,600 to develop. The anticipated revenue stream for the next 10 years was $400,000 per year. Proposal B The aerospace division proposed the development of new radar surveillance equipment The anticipated cost was S2,441 , 700. The anticipated revenue stream for this project was $450,000 per year for the next 10 years Proposal C Proposal C was a second proposal from the auto airbags division. It called for special equipment to be used in the disposal of environmentally harmful waste material created in the manufacturing process. The equipment cost $145,680 and was expected to provide cost savings of S15,000 per year for 15 years. Proposal D Proposal D was a second proposal from the aerospace division. It called forthe development of a new form of a micro electric control system that could be used for fighter jets that were still in the design stage at another aerospace company. Ifthe other aerospace company was successful in the development ofthe fighter jets, they would be sold to underdeveloped countries in various sectors ofthe world. The cost to produce the micro electric control system was $1 ,262, 100 and the best guess estimate was that the investment would return $300 ,000 a year for the next eight years ire d Compute the internal rate of retum and the net present value for each of these four proposals.