Bankrupt Corporation is in a deep financial crisis. You are one of the financial avengers Bankrupt is desperately seeking help from. CEO of the company informed you that he is considering the two risky projects Thanos and Loki to protect the firm from financial collapse. Both projects have similar risk characteristics. Bankrupts WACC is 11%. The initial investments for both the projects are $200 million. Cashflow from the projects are as follows;

Year 1 2 3 4

Thanos 10M 60M 80M 160M

Loki 70M 50M 20M 160M

Now, your job is to explain the following questions in great detail so that the CEO understands your plans to protect the firm.

Explain the concept of capital budgeting decisions. How it is different from the firms investing decisions.

Explain the concepts of independent and mutually exclusive projects

What is NPV -explain with an example?

Calculate NPV for both the projects and show the steps

Explain your decision when Thanos and Loki are mutually exclusive, and when they are independent.

WACC has increased to 15%. What change you will see in NPV?

What is IRR and how it is different from NPV? What is the IRR for Thanos and Loki?

Based on IRR which project you should accept?

How is IRR identical to Bonds YTM?

WACC has increased to 15%. What change you will see in IRR? Is it good for the firm?

What is the reinvestment assumption for NPV and IRR? Why NPV is better than IRR?

Find the MIRR for both projects and explain the difference with IRR.

Is MIRR a better measure than NPV? Why and why not? Calculate the pay-back and discounted pay-back for both the project. Discuss the differences between the two methods.