Answer the independent questions:

2. XYZ Inc. is evaluating the purchase of a machine costing P500,000. The machine is expected to generate annual net cash inflows of P145,000 for 5 years. The machine has no salvage value. The firm's cost of capital is 12%. The net present value factor for 5 years at 12% is 3.6048 and at 14% is 3.4331. What is the internal rate of return for this investment?

3. ABC Co. set its cost of capital at 12%. The company is contemplating to accept the following projects: Project A Project B Project C |Project D Initial cash outlay P 200,000 P 298,000 P 248,000 P 272,000 Annual net cash inflows Year 1 65,000 100,000 80,000 95,000 Year 2 70,000 135,000 95,000 125,000 Year 3 80,000 90,000 90,000 90,000 Year 4 40,000 80,000 80,000 60,000 Net present value (3,798) 4,276 14,064 14,662 Internal rate of return 11% 13% 14% 15% Required: 1. Calculate the profitability index of each project. 2. Among the projects, which projects should ABC Co. select if (a) no budget restriction; (b) a budget of P600,000; (c) a budget of P300,000. 3. If Project B and C are mutually exclusive, which projects should ABC Co. select if (a) no budget restriction; (b) a budget of P600,000; (c) a budget of P300,000