7. You have been hired as a project analyst by a real estate development firm that specializes in commercial real estate projects. Tomorrow you will be presenting your analysis of four projects to the top management team for the firm. You have estimated initial investment costs and the stream of revenues over time for each project. The results of your analysis are presented below. You used a cost of capital of 7% in all net present value calculations. [NOTE: Initial investment costs are already netted out of the NPV of project figures for each project.] F Initial Investment NPV of Project 7% Internal rate of Return a. Project A B C D 2,500,000 1,750,000 900,000 1,400,000 730,000 9% -100,000 600,000 320,000 4% 18% 11% Consider the case where these projects are mutually exclusive. Your construction budget is large enough to finance any of these projects. Any unspent construction funds will be used to pay off loans that have a 7% interest rate, so the cost of capital is 7%. Which, if any, of these projects would you recommend your firm select and why? (4) (4) b. You need to be ready for questions about the cost of capital. Consider the case where these projects are not mutually exclusive, your firm's cost of capital rises to 10%, and there is no constraint on the amount it can invest. Which, if any, of these projects would you recommend your firm select and why? C Consider the case where these projects are not mutually exclusive and the initial investment budget (i.e., maximum total initial investment) is limited to $4,000,000. The cost of capital is 7%. Which, if any, of these projects would you recommend? Justify your recommendation.