4. There are 4 questions in this assignment, and you need to answer them all. These questions fall into 4 different categories: a. Part 1 - Compute Payback, NPV, and IRR for both projects (4 marks) b. Part 2 - Evaluate the projects' acceptability using all three decision criteria from previous question. (4 marks) c. Part 3 - Rank the two projects according to Profitability Index and analyze. (2 marks) d. Part 4 - Research, Explain and Make some suggestions (5 marks) The submission of this assignment will only be on BLACKBOARD. In order to get a full mark, make sure to achieve these aspects: Clear focus Completeness - Fully answers the questions Correctness - Answers the questions correctly Demonstrate insights and analysis into the issue AU for the world Project Analysis (Excel): Ali Yaqoob Yusuf Ali graduated from University of Bahrain, College of Business Administration in July and has been working for about a month as a Junior Financial Analyst at Aluminium Bahrain B.S.C. (#ALBA), one of the largest and most modern aluminium smelters in the world. When Ali arrived at work on Thursday morning, he found the following memo in his e-mail: To: Ali Yaqoob Yusuf JOJ From: Bryan Harris, Chief Financial Officer, ALBA RE: Capital Budgeting Analysis www.albasmelter.com Provide an evaluation of three proposed projects whose cash flow forecasts are found below: Potline 7a Potline 7b Potline 7c Initial Outlay BHD (11,000,000) BHD (16,950,000) BHD (14,100,000) Year 1 3,000,000 8,100,000 3,900.000 Year 2 3,000,000 2.900.000 3,900,000 Year 3 4,000,000 4,400,000 3,900,000 Year 4 0 (1.400.000 3.900.000 Year 7,000,000 8.100,000 3.900.000 Year 7.000.000 8.100.000 3,900.000 Since these projects involve additions to ALBA's portfolio of high-quality aluminium product line, the company requires a rate of return on those projects equal to 11,90%. As you are no doubt aware, ALBA relies on several criteria when evaluating new investment opportunities. In particular, we require that projects that are accepted have a payback of no more than 4 years, provide a positive NPV, and have an IRR that exceeds the company's discount rate. Give me your thoughts on these three projects by Sam Sunday moming. Ali was not surprised by the memo, for he had been expecting something like this for some time. ALBA followed a practice of testing each new financial analyst with some type of project evaluation exercise after the new hire had been on the job for a few months. After re-reading the memo, Ali decided on his plan of attack. Specifically, he would first do the obligatory calculations of Payback, NPV, and IRR for both projects. Ali knew that the CFO would grill him thoroughly on Sunday morning about his analysis, so he wanted to prepare well for the experience. One of the things that occurred to Ali was that the memo did not indicate whether the three projects were independent or mutually exclusive. So, just to be safe, he thought he had better rank the two projects under all assumptions in case he was asked to do so on Sunday morning. Ali sat down and made up the following "to do" list: 1. Compute Payback, NPV, and IRR for all projects. (4 marks) 2. Evaluate the projects' acceptability using all three decision criteria (listed above) and based on the assumptions that the projects are both independent and mutually exclusive. (4 marks) 3. Rank the projects according to profitability Index (PI) and make a recommendation as to which (if either) should be accepted under the assumption that the projects are mutually exclusive. (2 marks) 4. What would you do if economic lives of the projects were unequal? Research, Explain and Make some suggestions based on the assumption that the projects are mutually exclusive. Also list the sources you have benefited such as 1) Richard Breafey. 2017. "Principles of Corporate Finance", McGraw Hill, New York Note that Google copy-paste will result in 0 (zero)