Question 1: Capital Budgeting Celcom Limited has weighted average cost of capital (WACC) of 6% and is considering two mutually exclusive investments with the following cash flows: Year 0 1 2 3 4 5 Project A (in '000) -RM1,025 RM380 RM380 RM380 RM380 RM380 Project B (in '000) -RM2,400 RM770 RM770 RM770 RM770 RM770 1. Calculate Project A and B's payback period) II. Calculate Project A and B's discounted payback period. III. Calculate Project A and B's net present value (NPV)? IV. What are Project A and B's internal rate of return (IRR)? V. A wrong choice of project would result in value loss. Which project should be selected? Briefly explain your reasons. VI. If these two investments are independent, which project should be selected? Briefly explain. VII. Explain the advantages of NPV over other methods in the decision making. Question 2: Cost of Capital (2) Axiata corporation is considering four average -risk projects with the following costs and rates of return Projects Cost Expected Rate of Return RM1500 15% RM3500 14.5% RM5500 14% ID RM1500 11.50% The company estimates that it can issue debt at a rate of rd = 11%, and its tax rate is 30%. It can issue preferred stock that pays a constant dividend of RM5 per year at RM50 per share. Also, its common stock currently sells for RM37 per share; the next year dividend (D) is RM3.50; and the dividend is expected to grow at a constant rate of 5% per year. The target capital structure consists of 70% common stock, 20% debt, and 10% preferred stock. 1. What is the cost of each of the capital component? II. What is Ahmed's WACC? lli. Only projects with expected returns that exceed WACC will be accepted. Which project should be accepted? IV. Why is the cost of retained earnings cheaper than the cost of issuing new common stock