Five years ago, STORM ARMADA Company purchased 600 shares of 9%, P100 par value preferred stock for P75 per share. Sarver received dividends on the stock each year for five years, and finally sold the stock for P90 per share. Instead of purchasing the preferred stock, STORM ARMADA Company could have invested funds in a money market certificate yielding a 16% rate of return. THIS YEAR, STORM ARMADA Company is considering project NAOSUMI that would require an initial investment of P462,000 and would have a useful life of 7 years. he annual cash receipts would be P300,000 and the annual cash expenses Ihe be P120,000. The salvage value of the assets used in the project would be P69.000. The company's tax rate is 30%. For tax purposes, the entire initial investment without any reduction for salvage value will be depreciated over 5 years. The company uses a discount rate of 18% for this kind of project. Affer sometime, STORM ARMADA Company was able to reduce its cost of capital to 12% which is normaly used as a hurdle rate for most of its capital expenditures and has done the following analysis for four projects for the upcoming year Project 1 Project 2 Project 3 Project 4 P200,000 P298.000 P248.000 P272.000 Initial cash outlay Annual net cash inflows Year 1 Year 2 Year 3 Year 4 P 65.000 P100.000 P 80,000 P 95.000 70.000 135.000 80,000 40,000 (3,798) 98% 11% 95.000 125.000 90.000 80.000 14,064 106% 14% 90.000 65.000 4.276 101% 90.000 60.000 14,662 105% 15% Net present value Profitability index of 13% Internal rate return PART II refurn that could have been received on the money market certificate. Prove your answer. A.Defermine whether or not the preferred stock provided at least the 16% rate of Compute the net present value of the NAOSUMI project C. Between Projects 1-4, which project(s) should STORM ARMADA Company select during the upcoming year under each budgeted amount of funds? Q. No budget restrictions b.A budget of 600,000 C.A budget of 300,000 D. What will be your answer in letter C if project 2 and project 3 are mutualy exclusive projects? a. No budget restrictions b. A budget of 600,000 C.A budget of 300,000