please do 1. answear all questions. thank you

1. CAPIAL BUDGETING CRITELIA The essence of capital budgeting and resource alocanion is a search for good investments no place the firm's capital. The process can be simple when viewed in purely mechanical terms, but a number of subtie issues can obscure the best investment choices. The capital-buderding analyit, therefore, is necessarily a detective who must winnow bad evidence from good. Muth of the challenge is in knowing what quamitative analysis to generate in the first place. Suppove vou are a new eapital-budgeting analyst for a company considering imvestments in the eight projects listed in Cahibit 1 . The chief financial efficer of your cempany has asked you ta rank the projects and recommend the "four best" that the company should accept. In this akigmenent, only the eqantitative consideratians are relevant, No other project characteristics are deciding factors in the selection, except that management has determined that projects 7 and 8 are mutually exclusive. All the projects require the same initial investmect: $2 millign. Moreover, all are believed to be of the same risk class. The firm's weighted average cost of capital has never been estimated in the past. analysts have simply assumed that 10K was an appropriate divceunt rate (althouch certain officers of the company have recently asserted that the discosnt rate should be much hicherf. To stimulate your analysis, consider the following evestions: a. Can you rank the projects simply by inspecting the cash foos? Why or why not? b. Which quantitative ranking methods will you use to rank the projects? Which are the best and why? c. What is the ranking vou found by using quantitative methods? Does this ranking ddfler fram the ranking obtained by simple inspection of the cash floras? d. What kinds of real imestment projects have cash fiows similar to those in Exhibit 1 2. TIME VALUE OF MONEY PROBLEM - THE MBA DECISION Ben Bates graduated from college six years ago with a finance undergraduate degree. Alhough he is satisfied with his current job; his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Ben currently works at the money management firm of Dewey and touis. His annual salary at the firm is $69,000 per year, and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program. The Ritter College of Business at Wilton University is one of the top MaA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $75,000, payable at the beginning of each school year, Books and other supplies are estimated to cost $3,600 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $140,000 per year, with a $20,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated, one-year program, with a tuition cost of $90,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $5,400. Ben thinks that he wil receive an offer of $110,000 per year upon graduation, with an $18,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be 29 percent. Both schools offer a health insurance plan that will cost $3,500 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $2,500 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 4.7 percent. a. Assuming all salaries are paid at the end of each year, what is the best option for Ben from a strictly financial standpoint? b. What initial salary would Ben need to receive to make him indifferent between attending Wilton University and staying in his current position? c. Suppose, instead of being able to pay cash for his MBA, Ben must borrow the money. The current borrowing rate is 4.3 percent. How would this alfect his decision