Q2b and Q2c

2. There are three mutually exclusive investment options and the cashflow structures of Options 1 and 2 are projected and shown in the table below: For Option 3, it is to invest $0.1 million now in a 5-year zero coupon bond with a face value of $150,000, where a zero-coupon bond is a type of bond that does not make any interest payment and the bondholder only receives the face value of the bond at maturity. (a) What is the cash flow structure of Option 3? Give your answer in form of a table. (2 marks) (b) Evaluate which option is the best if the discount rate is 3%. (7 marks) (c) Calculate the internal rate of return (IRR) of each of the options and evaluate again which option(s) should not be selected if now the cost of capital to finance the option is 9% ? (8 marks)