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American University Of The Middle East Problem 1. (20 points) Project X costs $1,000, its expected cash inflows are $500 per year for 3 years,

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American University Of The Middle East Problem 1. (20 points) Project X costs $1,000, its expected cash inflows are $500 per year for 3 years, and its WACC is 10%. What is the project's NPV? Show calculation. Would you accept the project? Problem 2. (25 points) Calculate NPV of the following project if WACC=11%. Would you accept the project? 0 2 3 + + Project X -$10,000 $6,500 $3,000 $3,000 $1,000 25 Problem 3. (25 points) You have two project opportunity (A and B). Their cost of capital is 10%. End-of-Year Cash Flows 0 1 -$1,000 $1,150 -$1,000 $100 2 Project A Project B $100 $1,300 What are the projects' NPVs, IRRs? Which project would you select if the projects were mutually exclusive? Explain. Problem 4. (30 points) Your division is considering two projects with the following cash flows (in millions): 2 3 0 -$25 Project A Project B -$20 $5 $10 $10 $9 $17 $6 a) What are the projects' NPVs assuming the WACC is 5%? 10%? 15%? b) What are the projects' IRRs at each of these WACCs? c) If the WACC was 5% and A and B were mutually exclusive, which project would you choose

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