Students are required to complete the following: You are a junior business analyst at Budget Food Ltd. Your department has been approached by management about three new products they would like to consider manufacturing. Your supervisor provides you with the following information: A. Capital Budgeting Analysis Provide an evaluation of the three proposed projects whose cash flow forecasts are found below: Product A Product B Product C Initial cost $7,600,000 $6,500,000 $5,120,000 $ $ Expected cash inflows: Year 1 2 3 4 5 3,200,000 3,000,000 2,400,000 3,200,000 1,800,000 2,000,000 2,400,000 2,100,000 2,600,000 1,800,000 2,000,000 2,100,000 1,800,000 1,600,000 I Since these projects involve additions to Budget Foods' highly successful Cold Storage product line, the company uses the WACC of the line to evaluate the additions. N.B. The projects are independent i. Cost of Debt is 15.63% and the tax rate is 20% The dividend paid out for preference shares is $6. Each share currently trades at $21 and has a floatation cost of $3 iii. Ordinary shares receive a dividend of $1.50 per share. It has growth rate of 10% and it is currently trading at $15 with a floatation cost of $2.31. Note: Debt: Preference Shares: Ordinary Shares is 3: 2:5 You are asked to report the following to your supervisor before the end of the week. Note: Debt: Preference Shares: Ordinary Shares is 3: 2:5 You are asked to report the following to your supervisor before the end of the week. 2020/202 7- Seniester / [Financial Management II] B. Calculate the WACC to be used to discount each product option (10 marks) Calculate for each project: i. The payback period The Net Present value (NPV) iii. The Profitability Index (PI) iv. Which product should be accepted and why? (6 marks) (10 marks) (9 marks) (4 marks)