50 pts Jazz Corp. is a logistics and transportation company. The finance director, Kristofer Corpuz, is in the process of evaluating a number of proposed capital investment projects. The following information relates to the firm's finances. Some years ago the firm issued 10,000 bonds, each with a face value of P1,000 and paying an annual coupon rate of 9.2%. These bonds are now trading at P1,040 per bond. A coupon payment on these bonds was made yesterday and the bonds mature next year. The firm has no other debt or preferred stock outstanding. The firm has 2,000,000 shares of common stock outstanding. The stock is currently selling for P14.80 per share and the firm is expected to pay a dividend of P1.48 per share next year. The dividend is expected to grow at a constant rate of 4% per year in the foreseeable future. The firm's corporate tax rate is 30%. Corpuz is reviewing the capital investment projects shown below. All projects are in Jazz's usual line of business and are being considered independently of each other. The following information is available. (Note that the net present values of the projects are estimated using the weighted average cost of capital.) Project Initial Outlay IRR NPV A P450,000 17.0% P18,800 B P128,000 19.5% P2,300 C P262,000 16.2% P9,800 D P180,000 10.5% -P7,000 E P240,000 16.5% P22,500 F P160,000 11.1% -P900 The firm is also evaluating another proposed capital investment; project X, which is in a completely different line of business from Jazz's usual operations. The project is expected to be financed from the existing capital structure and does not fall within any capital rationing restrictions. The following forecasted net after-tax cash flows relate to project X. Year O Year 1 Year 2 Year 3 Year 4 -P200,000 P60,000 P80,000 P80,000 P80,000 REQUIRED: A. Referring to projects A through F: 1. Identify which projects should be accepted by Jazz. Provide a brief defense of the decision criteria that you have used in arriving at your recommendation (10 points) 2. Assume that the firm faces a capital constraint of P700,000. Identify the project or projects the firm should undertake? Provide a brief explanation for your recommendations. (10 points) B. Referring to project X, state whether the firm should use its weighted average cost of capital to evaluate this project. Explain your answer. (10 points) C. In the past the firm has typically used the payback period method for evaluating risky projects and accepted projects with a payback period less than 3 years. 1. With a payback period of 2.75 years, what decision should the firm make regarding project X? (10 points) 2. Provide one reason why using the payback period can result in the firm making a sub-optimal decision. (10 points)