A. Facts Enterprises is trying to select the best investment from among four alternative independent projects presented by their respective firms. Each alternative involves an initial outlay of $80,000 and a 10% cost of capital. Management requires that all project investments should be recovered in 4 years. Their cash flows follow: Year Sun Ltd Moon Ltd Best Ltd Pep Ltd 1 30,000 20,000 20,500 0 2 25,000 30,000 20,500 30,000 3 20,000 0 20,500 0 4 15,000 20,000 20,500 28,000 5 10,000 10,000 20,500 25,000 6 5,000 30,000 0 40,000 i) Calculate each projects Payback Period. Based on the payback periods, which project(s) should they accept if the project(s) are independent? Which project(s) should they accept if the projects are mutually exclusive? (11 marks) ii) Calculate each projects Net Present Value (NPV). Based on the NPVs, which project(s) should they accept if the project(s) are independent? Which project(s) should they accept if the projects are mutually exclusive? (19 marks) iii) Calculate the discounted payback period for the projects with positive NPVs. (10 marks) iv) What does it mean for projects to be mutually exclusive? How should managers rank mutually exclusive projects? (5 marks)

B. Discuss the strength and weaknesses of each of the following capital budgeting technique below? (16) i. Payback ii. ARR iii. Profitability Index iv. IRR