The class is financial management please answer the following questions to the case study

Aerocomp, Inc. As she headed toward her boss's office, Emily Hamilton, chief operating officer for the Aerocomp Corporationcomputer services firm that specialized in airbome support-wished she could remember more of her training in financial theory that she had been exposed to in college. Emily had just completed summarizing the financial aspects of four capital investment projects that were open to Aerocomp during the coming year, and she was faced with the task of recommending which should be selected. What concerned ber was the knowledge that her boss, Kay Marsh, a "street smart" chief executive, with no background in financial theory, would immediately favor the project that promised the highest gain in reported net income. Emily know that selecting projocts purely on that basis would be incorrect; but she wasn't sure of her ability to convince Kay, who tended to assume financiers thought up fancy methods just to show how smart they were. As she prepared to enter Kay's office, Emily pulled her summary sheets from her briefcase and quickly reviewed the details of the four projects, all of which she considered to be equally risky. A. A proposal to add a jet to the company's fleet. The plane was only six years old and was considered a good buy at $300,000. In returm, the plane would bring over $600,000 in additional revenue during the next five years with only about $56,000 in operating costs. (See Figure 1 for details.) B. A proposal to diversify into copy machines. The franchise was to cost $700,000, which would be amortized over a 40-year period. The new business was expected to generate over $1.4 mitlion in sales over the next five years, and over $800,000 in aftertax eamings. (See Figure 2 for details.) C. A proposal to buy a helicopter. The machine was expensive and, counting additional training and licensing requirements, would cost $40,000 a year to operate. However, the versatility that the helieopter was expected to provide would generate over \$1.5 million in additional revenue, and it would give the company access to a wider mariket as well. (See Figure 3 for details.) D. A proposal to begin operating a fleet of trucks. Tea could be bought for only $51,000 each, and the additional business would bring in almost $700,000 in new sales in the first two years alone. (See Figure 4 for details). In her mind, Emily quickly went over the evaluation methods she had used in the past: payback, internal rate of return, and net present value. Emily knew that Kay would add a fourth, size of reported carnings, but she boped she could talk Kay out of using it this time. Emily herself fivored the net present value method, but she had always had a tough time getting Kay to understand it. One additional constraint that Emily had to deal with was Kay's insistence that no outside financing be used this year. Kay was worried that the eompany was growing too fast and had piled up enough debt for the time being. She was also against a stock issue for fear of diluting earnings and her control over the firm. As a result of Kay's prohibition of outside financing, the size of the capital budget this year was limited to $800,000, which meant that only one of the four projects under consideration could be chosen. Emily wasn't too happy about that, either, but she had decided to accept it for now, and concentrate on selecting the best of the four. As she closed her briefcase and walked toward Kay's door, Emily reminded herself to have patience; Kay might not trust financial analysis, but she would listen to seasible arguments. Emily only hoped her financial analysis sounded sensiblel Figure 3 Financlal analyals of Project C: Add a helleopter to the company's fieot 2. Computer the Payback Period, Discounted Payback Period, Net Present Value, Internal Rate of Return (IRR), and Productivity Index of all four alternatives based on cash flow. User 10 percent for the cost of capital in your calculations. For the Payback Period and for the Discounted Payback Period, compute to the midyear points as discussed in class. 3. a. According to the payback method, which project should be selected? b. What is the chief disadvantage of this method? c. Why would anyone want to use this method? 4. a. According to the Discounted Payback method, which project should be selected? b. What is the chief disadvantage of this method? c. Why would anyone want to use this method? 5. a. According to the Net Present Value method, which project should be selected? b. What are the major advantages of the Net Present Value method? c. What are any disadvantages of the Net Present Value Method? d. If Kay had not put a limit on the size of the capital budget, under the NPV method which projects would have been accepted? 6. a. According to the IRR method, which project should be chosen? b. What is the major disadvantage of the IRR method that occurs when HIGH IRR projects are selected? c. Can you think of another disadvantage of the IRR method? (Hint: Look over the four alternatives and compare the sizes of the projects. Ask yourself whether you would prefer to make a large percent return on a small amount of money or a small percent gain on a large amount of money.) d. Do the NPV and IRR both reject the same projects - Why? 7. a. According to the Productivity Index, which project should be chosen? b. Explain why people use the Productivity Index. c. Explain why a Productivity Index so closely correlates with the results of NPV