I want the solution for question # 3 of this homework. Thank you

Mel\tBulu-Taciroglu ENG\t111\t-\tHW\t6 Due:\tFeb\t21,\t11pm Winter\t2016 1.\t(20\tpoints)\tA\tcomputer\tdesign\tfirm\tis\ttrying\tto\tchoose\tbetween\tthe\tfollowing\ttwo\tmutually\texclusive design\tprojects. Year Project\tI Project\tII 0 -30,000 -12,000 1 18,000 7,500 2 18,000 7,500 3 18,000 7,500 a) If\tmarket\trate\tis\t10%,\twhich\tproject\tshould\tthe\tfirm\taccept\tusing\tthe\tprofitability\tindex\tdecision rule? b) If\tthe\tfirm\tapplies\tthe\tNPV\tdecision\trule,\twhich\tproject\tshould\tit\ttake? c) Does\tusing\tIP\tor\tusing\tNPV\tas\ta\tdecision\trule\tmakes\ta\tdifference\tin\tthe\tfinal\tdecision? 2.\t(20\tpoints)\tAn\tinvestment\tproduces\tcash\tflow\tfor\t8\tyears\t(beginning\ta\tyear\tfrom\ttoday),\thas\ta\t6-year payback\tperiod\tand\tan\tinitial\tcost\tof\t$432,000(to\tbe\tpaid\tnow). The\tmarket\trate\tis\t12%.\tCash\tflow\tfor\tyears\t1\tthrough\t6\tis\tfixed\tat\t$X. Cash\tflow\tfor\tyear\t7\tand\t8\tare\t$100,000\teach. What\tcan\tyou\tsay\tabout\tNPV\tof\tthis\tinvestment? 3. (40 points) Textron is considering a four-year project to manufacture military drones. This project requires an initial investment of $10 million that will be depreciated straight-line to zero over the project's\tlife.\tAn\tintial\tinvestment\tin\tthe\tNet\tWorking\tCapital\tof\t$1.3\tmillion\tis\trequired\tto\tsupport\tspare parts inventory; this cost is fully recoverable whenever the project ends. The company believes it can generate\t$7.35\tmillion\tin\tpretax\trevenues\twith\t$2.4\tmillion\tin\ttotal\tpre-tax\toperating\tcosts.\tThe\ttax\trate is\t38%\tand\tthe\tdiscount\trate\tis\t16%.\tThe\tsalvage\tvalue\tof\tthe\tequipment\tover\tthe\tlife\tof\tthe\tproject\tis\tas follows (For example, if Textron decides to end the project in 2 years, fixed assets can be sold and a value\tof\t$5,744,000\tcan\tbe\tobtained\tafter\ttaking\tinto\taccount\tthe\ttax\tliabilities): Year Salvage\tValue 2 5,744,000 3 3,306,000 4 620,000 a) Assuming\tTextron\toperates\tthis\tproject\tfor\tfour\tyears,\twhat\tis\tthe\tNPV? b) If\tthe\tproject\tis\tabondoned\tafter\t2\tyears,\twhat\tis\tthe\tNPV? If\tthe\tproject\tis\tabondoned\tafter\t3\tyears,\twhat\tis\tthe\tNPV? Does\tit\tmake\tsense\tto\tcontinue\twith\tthe\tproject\tfor\t4\tyears? 4. (20 points) You are asked to choose between two mutually exclusive projects. The market rate of return\tis\t14%.\tFor\tboth\tprojects\tcash\tstreams\tbegin\ttoday\t(period\tzero)\tif\tyou\tundertake\tthem.\tFor\tthe first\tproject\tthe\tcash\tstream\tis\t(for\tyears\t0\tthrough\t3): -$750,\t$310,\t$430,$330 For\tthe\tsecond\tproject,\tcash\tstream\tis: -$2100,\t$1200,\t$760,\t$850 a) If these are independent projects and you do not have a budget constraint, which project(s) would\tyou\taccept\tusing\tProfitability\tIndex\tcriteria? b) If projects are mutually exclusive, which project would you pick if any, using the Profitability Index\tcriteria? 5.\t(Bonus:\t10\tpoints)\tYou\tare\tconsidering\tchoosing\tbetween\ttwo\tmutually\texclusive\tprojects:\tA\tand\tB. Initial\tinvestment\trequired\tfor\tA\tis\thigher\tthan\tthat\tof\tB. A-B\thas\ta\tprofitability\tindex\tof\t1. What\tcan\tyou\tsay\tabout\tNPVA\tand\tNPVB?\tAre\tthey\tequal?\tIf\tnot,\twhich\tone\tis\tbigger\tand\twhy