1) Task: You are given $10,000 capital budget and your firm has shortlisted ten potential investment projects (see attached case) for you to construct a portfolio. The constraints and requirements are as follows:

State your investment objective clearly on how to balance risk and return in your portfolio (e.g., balancing high risk project with low risk projects)

Note: Projects 7 and 8 are mutually exclusive

You cannot invest in a fraction of a project.

All projects are replicable i.e., you have the option to re-invest in the same project again with the same cashflow stream.

K = 10%

2) Calculate NPV, IRR, and Payback of all 8 project

EXHIBIT 1 | Projects' Free Cash Flows (dollars in thousands) Project number: 2 3 4 5 6 7 8 Initial investment $(2,000) $(2,000) $(2,000) $(2,000) $(2,000) $(2,000) $(2,000) $(2,000) Year $ 2,200* 1 2 3 4 $1,666 334* 165 $ 330 330 330 330 330 330 330* $1,000 $1,200 900* 300 90 70 $ (350) (60) 60 350 700 1,200 $2,250* 5 6 7 8 9 10 $ 160 200 350 395 432 440* 442 444 446 448 450 451 451 452 $10,000* $(2,000) $ 280 280 280 280 280 280 280 280* 280 280 280 280 280 280 $ 280 12 13 14 15 Sum of cash flow benefits $3,310 Excess of cash flow over initial investment $1,310 $2,165 $10,000 $ 3,561 $4,200 $ 2,200 $2,560 $ 4,150 $ 165 $ 8,000 $ 1,561 $2,200 $ 200 $ 560 $ 2,150 *Indicates year in which payback was accomplished