a) Calculate the net present value of each project and advise the company of the appropriate investment decision. Show all calculations.

b) For this scenario, state whether the investment decision in part 4.1 could change or would not change. Provide a brief explanation (no calculations required). Note that if more than one explanation is given only the first explanation will be marked. Would the investment decision change if projects A and B are independent projects? (Begin your answer with Could change or Would not change.)

c) For this scenario, state whether the investment decision in part 4.1 could change or would not change. Provide a brief explanation (no calculations required). Note that if more than one explanation is given only the first explanation will be marked. Would the investment decision change if project B substantially alters the financial risk of the firm while project A does not? (Begin your answer with Could change or Would not change.)

d) For this scenario, state whether the investment decision in part 4.1 could change or would not change. Provide a brief explanation (no calculations required). Note that if more than one explanation is given only the first explanation will be marked. Would the investment decision change if project B now costs only $500,000 and its IRR is greater than project As IRR? (Begin your answer with Could change or Would not change.)

A company is considering two mutually exclusive projects, A and B, each requiring an initial outlay of $1,000,000. The expected future net cash flows associated with the projects (stated in nominal terms), along with expected annual inflation rates, appear in the following table. Project A Project B Inflation rate Year 1 $400,000 $0 5% Year 2 $250,000 $100,000 5% Year 3 $600,000 $800,000 4% Year 4 $300,000 $950,000 3% The company's real weighted average cost of capital is 12 percent