Brasenose plc has earmarked funds for a new project, called Campion. The project is expected to yield the following cash flows:

	Cash Flow (in Real Terms)
Year
1	60,000
2	85,000
3	65,000
4	20,000

In addition, Brasenose plc can undertake further projects, subject to the constraint that investment funds for the portfolio of projects are limited to 2.5m. Details of the projects are as follows:

Project	Initial Investment 000	Duration Years	Expected Annual Inflow (in Real Terms) 000
A	410	4	150
B	380	5	200
C	600	4	165
D	545	4	215
E	735	4	225
F	775	5	220

Brasenose plc uses a money discount rate of about 15%, and inflation is expected to run at 5% for the duration of all projects.

Required:

(a) Calculate the present value of the expected cash flows arising from the Campion project;

(18%)

(b) Calculate the profitability index of each of the projects A to F;

(42%)

(c) Advise the Board of Brasenose plc as to which, if any, of the projects A to F the company should undertake.

(40%)

[Total 100%]