1. You are considering an investment decision on a project P1 where initial investment cost $350,000 and annual cash flows of $50,000 in the first 10 years (Year 1-10) and another $25,000 in the following 10 years (Year 11-20). Your required rate of return for an investment of a similar risk is 9%. Calculate NPV of the investment opportunity. Should you invest? Why or why not? 2. Calculate IRR of the investment on P1 above. Should you invest? Why or why not? 3. Calculate profitability index of the above investment. 4. You are considering another project, P2, from which you expect cash inflow of $65,000 for next 3 years. If your expected rate of return from this project is 10%, what would be the maximum initial investment amount you would spend on the P2? If the investment requires more than the maximum initial amount you have calculated above, would you still consider investing? Why or why not? 5. You are considering opening a bubble tea shop near the new campus and it would cost you $150,000 as an initial investment. After executing your target market study, SWOT and porter 5 forces, you came up with a business plan and expect cash flows as followed: Year 1: $25,000, Year 2: $35,000, Year 3: $45,000, Year 4: $60,000, Year 5: $60,000 What is the payback period of the investment? 6. If the discounted rate for the above cash flow in Q5, is 7%, what would be the discounted payback period? 7. If you require a bubble tea shop in Q5 to pay back your investment in 4 years, should you invest or not? Should you depend your investment decision on payback period? What are the advantages and disadvantages of payback period as a decision criterion? 8. You are considering making an investment and analyzed 2 projects below. If you require 10% return from both project, which project should you invest and why? What if you have a limited capital amount for investment? Year Project 1 Project 2 0 -$500 -$400 1 $325 $325 2 $325 $200