Question C1 Leaming.ton Ltd. is an IT company located in the Warwickshire. It's 2020 and the company is considering investing in a new project on renewables (we call it Project A). The cash flows for the project are shown in the table below (in million pounds). Assume that the appropriate monthly cost of capital for this project is 0.6%. 0 2 Year Cash flows 1 120 -300 280 (1) Make a suggestion on whether Leaming.ton should accept this project using the NPV capital budgeting rule. (15%) (ii) In 2019, the manager of Leaming.ton had considered investing in a cycling app project (we call it project B). The estimated hurdle rate of this project was 8.5% and, based on the estimated cash flows from the app, the IRR of the project was 7%. Briefly discuss the advantages and disadvantages of IRR rule in relation to the NPV rule. (20%) (iii) Based on the IRR and the hurdle rate, the manager decided to undertake the cycling app project. Explain in no more than 5 lines whether this was a good or a bad choice from a capital budgeting perspective, and why. (20%) (iv) Assume now that the company is considering another project which costs 300M today and will return 325M in 1 year (project C). Explain how the payback rule can be generally applied to choose between projects. Which project does the payback rule prefer between A and C? What are the limitations of the capital budgeting rule? (20%) (v) It's December 2021 and the CEO of Leming.ton decides to retire. They receive from the company a retirement bonus of 105,000. They decide to use these funds to buy a Tesla. Specifically, they plan to buy the Tesla (which costs exactly as much as the retirement bonus, i.e. 105,000) through a 20- years fixed rate mortgage loan with equal monthly instalments starting next month, January 2022. What is the amount of each individual monthly payment the CEO will make to buy the car, assuming that the annual r= 5%? (25%) Continued