Arkansas Technology Incorporated (ATI) purchases goods from its suppliers on terms of 3/15, net 40.

The following information is for Southern Cross Ventures. (6 marks)

The Symington Corporation Ltd. is considering investing in one of two mutually exclusive projects. Project A requires an immediate cash outlay of $1,000, while project B requires an immediate cash outlay of $1,400. Project A has a life of four years; Project B, five years. The cost of capital is 10%. After taxes net cash flows generated by each investment have been as follows:

Year	0	1	2	3	4	5
	Investment
A	($1,000)	$250	$300	$400	$500	-0-
B	($1,400)	$600	$500	$400	$300	$200

1. Calculate payback for each investment. (2 marks)

2. Calculate the Net Present Value (NPV) for each investment. (2 marks)

3. Calculate the Internal Rate of return (IRR) for each investment. (2 marks)
4. Calculate the Profitability Index (PI) for each investment. (2 marks)

5. Which investment would you select? Why? (2 marks)

a) What is Southern Cross Cash Conversion Cycle? (4 marks)

b) What does your answer about the cash conversion cycle tells you about Southern Cross use or need for cash? (2 marks)