QUIZ #2 Problem Solving on Capital Budgeting Instructions: Show your solutions and answers on sheet/s of paper. Round off PV factors and final answers to two (2) decimals. Problem 1- Even Cash Flows Consider the following data for Project X: Initial Investment Php 770,000.00 Useful Life 10 years Salvage Value Nil Annual Cash Inflows 160,000.00 Cost of Capital 11% Standard Payback Period 5 years Evaluate Project X using: (a) Payback period (10 points) (b) Discounted payback period (20 points) (c) Accounting rate of return; and (10 points) (d) Net present value method (20 points) (e) Profitability Index (10 points) (f) Internal Rate of Return (30 points) Problem 2- Uneven Cash Flows Consider the following data for Project Y: Cash Outflows, Year o Php 450,000.00 Useful Life 5 years Salvage Value Nil Cash Inflows: Year 1 150,000.00 Year 2 120,000.00 Year 3 90,000.00 Year 4 70,000.00 Year 5 60,000.00 Cost of Capital 10% Standard Payback Period Evaluate Project Y using (a) Payback period (10 points) (b) Discounted payback period (20 points) 4 years (c) Accounting rate of return if average annual profit is Php 8,000.00; and (10 points) (d) Net present value method (20 points) (e) Profitability Index (10 points) (f) Internal Rate of Return (30 points)