Capital Budgeting Situation Part 1 --Description of projects: You are evaluating investing $5,000 in one of two start-up proposals made by different friends of yours. Your choice can be either of the two or neither of the two (not both). The first project is a food truck business. It is very innovative, with unique food choices, prepared in a very savory manner (you participated in a taste test). The operation of the business is in a location with good demographics and no existing similar businesses. The business is expected to last for 4 years. You know that the risk of start-ups is very high: about 9 in 10 start-ups ultimately fail. The second proposal is a software project modifying an existing app. The app is an existing popular food delivery app, enjoying good success and positive cash flows. Users select food orders from the menus of local restaurants, which are then delivered to home via Uber or Lyft. The modification needed is to expand the app to another geographical location. There is an upfront cost to the developers; rewarded by subsequent "royalties" that will last 4 years. You have actually used this app before, and it worked very well. The risk of this project is from competitors--if another competing app is more successful, the resulting cash flows from the project would dwindle fast. Here are the estimated cash flows for each overall project as well as the expected returns for your $5,000 investment. Your investment returns are directly proportional to the investment's overall cash flows. Investmen Investmen Food Truck App Project t Year o (72,500) (5,000) (25,000) (5,000) Year 1 22,000 1,517 22,000 4,400 Year 2 38,000 2,621 11,000 2,200 Year 3 52,000 3,586 5,000 1,000 Year 4 67,000 4,621 3,000 600 Part 2--Calculate IRR, NPV, and PB: Estimate the IRR of your investment in each project. Given a 25% hurdle rate, which project(s) could be acceptable? Estimate the NPV of your investment in each project using a discount rate of 25%; that is, your required return for these kinds of projects is 25%. Which project (if either) is indicated given NPV analysis? Finally, calculate payback of your investment in each project. You have no "company policy" to compare payback with, but you certainly would like to get your initial investment back sooner than later. Part 3--Decision time: Personally, based on all the information, what would you do with your $5,000? You can select either project or neither project. Indicate your choice and rationale. Include all the decision tool results in your analysis