Max Laboratories is evaluating three independent projects. Project 1: Dog Treats, Project 2: Dog Food, and Project 3: Dog Toys. Treats Food Toys Cash Flows Initial Investment $ 4,000,000 $ 3,800,000 $ 4,400,000 1 $ 1,200,000 $ 800,000 $ 2,300,000 2 $ 1,400,000 $ 1,000,000 $ 1,900,000 3 $ 1,500,000 $ 1,700,000 $ 1,000,000 4 $ 1,800,000 $ 2,200,000 $ 800,000 Std. Deviation of IRR 10% 8% 12% 1. Calculate Payback Period, NPV, IRR, and MIRR for all projects. Which project(s) should the firm accept? Explain in detail the reasons for your recomendation. 2. Max Labs Inc. current portfolio of products has a 10% IRR and a 10% standard deviation. The correlation coefficients with the firm portfolio are 0.5 (r=0.5) for both, Dog Treats and Dog Food; zero correlation with Dog Toys (r=0). A) Calculate the effect of each of the projects on the overall risk of the firm (standard deviation) and on the Coefficient of Variation (CV). To calculate the combined IRR and std. deviations, consider that the weight of each project is 20% of the total portfolio. Correlation with Portfolio Portfolio weight New project Portfolio Std. Deviation IRR C.V. Existing Portfolio 1.00 100% 0% 10% 10% 1.00 Firm Portfolio + Treats 0.50 80% 20% Firm Portfolio + Food 0.50 80% 20% Firm Portfolio + Toys 0.00 80% 20% B) What is your opinion on Max Labs' coefficient of variation and total risk before and after undertaking each project. wacc is 10%