Max Marks Marking Scheme - Investment Detective Task: You are given $10,000 capital budget and your firm has shortlisted ten potential investment projects (see attached case) for you to construct a portfolio. The constraints and requirements are as follows: State your investment objective clearly on how to balance risk and return in your portfolio (e.g., balancing high risk project with low risk projects) Note: Projects 7 and 8 are mutually exclusive You cannot invest in a fraction of a project. All projects are replicable i.e., you have the option to re-invest in the same project again with the same cashflow stream. K= 10% Calculate NPV, IRR, and Payback of all 8 projects Answer in space below: 30 20 Clearly state your investment objectives. E.g., get invested money back as early as possible; maximize firm's value with new projects; avoid potential losses etc. Answer in space below (max 50 Words): 50 List of Projects for your portfolio - explain how your portfolio will meet your stated investment objectives Answer in space below (max 50 Words) EXHIBIT 1 | Projects' Free Cash Flows (dollars in thousands) Project number: 1 2 3 4 5 6 7 8 Initial Investment $(2,000) $(2,000) $(2,000) $(2,000) $(2,000) $2,000) $(2,000) $(2,000) Year 1 $ 330 $1,666 $ 160 $ 280 $ 2,200* $1,200 $ (350) 2 330 334 200 280 900 (60) 3 330 165 350 280 300 60 4 330 395 280 90 350 5 330 432 280 70 700 6 330 440" 280 1,200 7 330* 442 280 $ 2,250 $1,000 444 280* 9 446 280 10 448 280 11 450 280 12 451 280 13 451 280 14 452 280 15 $10,000* $(2,000) $ 280 Sum of cash flow benefits $3,310 $2,165 $10,000 $ 3,561 $4,200 $ 2,200 $2,560 $ 4,150 Excess of cash flow over initial investment $1,310 $ 165 $ 8,000 $ 1,561 $2,200 $ 200 $ 560 $ 2,150 *Indicates year in which payback was accomplished