BACKGROUND Consider the following two investment projects: Project A: has an initial cost of 20,000 euros and requires additional investments of 5,000 euros at the end of the first year and 15,000 euros at the end of the second year. This project has been running for two years and generates 20,000 euros per year of revenue. Project B: has an initial cost of 20,000 euros and requires an additional investment of 10,000 euros at the end of the first year. This project has been running for a year and generates 32,000 euros of revenue at the end of the project. If we consider an interest rate of 5%, the NPV of these projects have the following values: Project A: NPV = -1,179.15 euros Project B: NPV = 952.38 In relation to the IRR value: Project A: IRR = 0% Project B: IRR = 10%. RESOLVE 1. Starting from the value of the NPV, calculated with a market interest rate of 5%, which of the two projects is the most recommendable? 2. Justify the previous response by naming and explaining the reasons and causes that cause one project to be more profitable than another. 3. Taking into account the values concerning the IRR of each of the projects, are the two projects executable? Justify your answer. 4. If both projects are executable, which of the two is recommended? Justify your answer 5. Suppose we are going to make an investment in machinery whose cost is 90,000 euros and we plan to obtain a return of 20%, that is, we will obtain a profit of 18,000 euros. Two scenarios are proposed for the financing of this project (in both cases we understand that all the benefit gained is liquidity) a. Own financing 70% - External financing 30%. The total cost of external financing: 1,755 euros. Profit Tax 25%. b. Own financing 20% - Financing from others 80%. The total cost of external financing: 3,960 euros. Profit Tax 25%. 5.1 Based on the information provided and considering this operation in isolation, it analyses which of these two financing options for the project is more interesting for the profitability of the partners and the debt ratio. 5.2 After choosing one of the options, state what specific types of financing you would use. Give examples