Task 2: The founders of Alfa Cash Capital are not quite happy with this policy, since they think that now the company is too strict with its investments and may lose potential customers. Evaluate the investment policy. Explain what factors may ease the processes. (500 words above)

Microfinance Company Alfa Cash Capital had financial problems recently. Accord- ing to independent auditors' report, the main sources of the problems were a short- age of financial analyses and ignorance of capital budgeting issues. To address the issues, the founders of the company created a financial council that will be in charge of the company's financial analyses. Members of the council are new people with various financial backgrounds, and they decided to make in-depth analyses of every proposed project. Alfa Cash Capital is considering a long-term investment of $500,000 for 15 years. The required rate of return is 15 percent. Since the council thinks that 15 years is quite a long time period it made the following decision rules for acceptable of investment projects: (a) NPV should be positive; (b) pay-back period should be a maximum of 8 years; and (c) the PI should be close to 5 percent. The company is offered two investment projects for consideration: Initial outlay Inflow year 1 Inflow year 2 Inflow year 3 Inflow year 4 Inflow year 5 Inflow year 6 Inflow year 7 Inflow year 8 Inflow year 9 Inflow year 10 Inflow year 11 Inflow year 12 Inflow year 13 Inflow year 14 Inflow year 15 PROJECT 1 - $500,000 40,000 80,000 50,000 50,000 70,000 40,000 75,000 102,000 109,000 110,000 140,000 500,000 75,000 79,000 100,000 PROJECT 2 - $500,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000