(a) Krispy Fried Chicken is contemplating three independent investments opportunities: Pies, Muffins, and Cakes. Each project has the following annual cash flows: ($ millions) 0 1 2 Pies 20 -100 85 Muffins -100 215 -100 Cakes -120 60 80 The relevant opportunity cost of capital for these projects is 5% p.a. Calculate the net present value for each project. Which project(s) should Krispy Fried Chicken undertake? Explain your decision. (4 marks) (1) Calculate the profitability index for each project. Now assume that Krispy Fried Chicken has only $100 million to invest would their decision change? Explain. (4 marks] (b) Pizza Hat is considering a new line of business selling donuts. This new business operation will require the company to purchase new deep-frying machines that will cost $1.44 million. These costs will be depreciated on a straight-line basis to zero over three years. At the end of three years, the company will exit from this business operation and sell pancakes instead. Pizza Hat will then sell the machines at an estimated market value of $310,000. The donuts project is expected to generate $1.8 million in sales each year. The operating costs are expected to be $955,000 per year. Working capital of $450,000 will be required from the outset and no additional allocation needs to be made to working capital. The company tax rate is 35% and the donut project's required rate of return is 12% p.a. () What total investment is required at the start of the project? (Ensure you detail each component in your answer [2 marks] (H) What is the project's total net cash flow in Years' 1 and 22 (Ensure you detail each component in your answer) (5 marks] (1) What is the project's total net cash flow in Year 3? (Ensure you detail each component in your answer) [4 marks] (iv) What is the project's net present value? Do you recommend it accepted by Pizza Hat? [2 marks]