1.XYZ Company is exploring two mutually exclusive opportunities. There are two available opportunities for XYZ with the following information:

a.ABC Company has projected annual returns of Php7 million and outstanding liabilities of Php5 million.

b.DEF Company has projected annual returns of Php12 million and outstanding liabilities of Php20 million.

c.Both companies have terminal value of Php100 million.

If you will assess the company for five years with the required rate of return of 10%, which company will you recommend purchasing and how much? Why?

2.Using the information in No. 1, which is a better choice if the initial investment for ABC Company and DEF Company is Php50 million and Php110 million, respectively. The cost of capital for the two companies are 10%.

*Show your solutions using Microsoft Excel*