“LEMON” is the company that sells fruit to poor people.

The following budget net cash flows relate to two marketing projects in 6 years:

	NET CASH FLOWS (IN $ 1,000,000)
YEAR PROJECT A PROJECT B	0 -60 -72	1 20 45	2 20 22	3 0 0	4 20 13	5 20 13	6 20 13

Requirements:

(i) Calculate the NPVs for each project, assuming 10% cost of capital. Which project is better to invest, why? (P4).

(ii) What is the IRR, Payback and ARR of each project which has a zero value after 6 years? In each result, which project is better to invest? why? (P4)

(iii) What are the advantages and disadvantages of using NPV and Payback (P4)?

(iv) In this company case, which tools we should apply when preparing the budget? Why? Give at least two tools that you think it is applicable to the company. (M3)

(v) To manage the business risk, the Boss need you to consult how to reduce the difference between budgeting and actual in forecasting, bases on the data provided in this case as well as Fruit market information. (D2)