1. Which of the following types of markets can the NASDAQ market in the USA be classified as: (Note - Please tick ALL of the options which are correct)? (1.5 marks)

Primary Market

Secondary Market

Auction Market

Dealers Market

OTC market

Exchange market

Capital market

Monetary Market

Underlying Market

Derivative Market

2. You are the CFO of Black Gold Mining Ltd, which is offering an investment in two (2) large projects with the cash flows presented in the table below. Your company can only choose one of the projects (I or II), as shown in the table.

Project I Project II

Cost $550 000 $640 000

Future Cash Flows

Year 1 230 000 330 000

Year 2 210 000 300 000

Year 3 200 600 250 000

Year 4 150 000 180 000

Year 5 120 000 150 000

Required:

Undertake the project evaluation and identify which project Black Gold Mining should choose, using:

a) The Net Present Value (NPV) method with the discount rate of 12%

b) The Payback Period (PBP) method with benchmark of maximum 2 years

c) If there is a conflict between the NPV method and the PBP method, which investment criteria should the company use to make the final capital budgeting decision and why?