A corporation uses a 12% hurdle rate for all capital expenditures and has done the following analysis for four projects for the upcoming year:

Project 1 Project 2 Project 3 Project 4

Initial cash outlay P200,000 P298,000 P248,000 P272,000

Annual net cash inflows

Year 1 P65,000 P100,000 P80,000 P95,000

Year 2 70,000 135,000 95,000 125,000

Year 3 80,000 90,000 90,000 90,000

Year 4 40,000 65,000 80,00060,000

Net present value

Profitability index

Internal rate of return 11% 13% 14% 15%

Required:

a. net present value of the four projects (show computations)

b. profitability index of the four projects (show computations)

c. decide which project/s the company should undertake during the upcoming year assuming it has no budget restrictions. Justify.

d. decide which project/s the company should undertake during the upcoming year assuming it has only P600,000 of capital funds available. Justify.

e. decide which project/s the company should undertake during the upcoming year assuming it has . only P300,000 of capital funds available. Justify.