PROBLEMS:

1. A company is considering five investment opportunities. The companys cost of capital is 12%. Data on these opportunities under consideration are given below:

PhP (000s)

Project	Investment	PV@ 12%	NPV	IRR (%)	PI
1	35,000	39,325	4,325	16	1.12
2	20,000	22,930	2,930	15	1.15
3	25,000	27,453	2,453	14	1.10
4	10,000	10,854	854	18	1.09
5	9,000	8,749	(251)	11	0.97

1. 1. Based on the given data, rank the five projects in descending order of preference (1 being the most preferred) for each capital budgeting method (NPV, IRR, PI).
   2. Which project/s would you undertake if the company has PhP55 Million to spend? Justify.
2. Assume the following capital structure and cost of capital for A Company. Compute the Weight Average Cost of Capital considering all four sources of funds.

		Cost (%)
Mortgage Bonds ($1,000 par)	$20,000,000	5.14
Preferred Stock ($100 par)	5,000,000	13.40
Common Stock ($40 par)	20,000,000	17.11
Retained Earnings	5,000,000	16.00

3. Based on the results of your computation in problem #2, what financing mix would you prefer? Illustrate your answer.
4. On October 1, a Multinational Corporation (MNC) received an order from a Japanese customer for 2,500,000 Yen to be paid upon receipt of the goods, scheduled for December 1. The rates for

$1 US are as follows:

	Exchange Rates for $1 for Yen
Spot rate, October 1	83
Forward rate, December 1	82
Spot rate, December 1	81

1. Calculate what MNC would receive from the Japanese customer in US dollars using the spot rate at the time of the order.
2. Calculate what MNC would receive from the Japanese customer in US dollars using the spot rate at the time of payment.
3. Calculate the amount that MNC expects to receive on December 1 if MNCs policy is to hedge foreign currency transactions.
4. Briefly discuss implications.