The management of Capital Choosers Ltd (CCL) has 5 independent projects A, B, C, D, and E on hand. The initial outlays, annual cash flows and life of the projects is as under:

Projects

A B C D E

Initial Outlay, Tshs Million 100 150 175 180 135

Expected annual cash inflow, Tshs million 22 34 49 43 37

Life of the project, Years 10 9 6 8 7

Required: Find the NPV and Profitability Index of each project assuming the cost of capital of 15% Rank the projects in order of preference based on PI criterion Rank the projects in order of preference based on NPV criterion If the firm faces a capital constraint of Tshs 500 million and the projects are divisible, determine the wealth that can be created (i.e. increase in wealth) when the selection is based on (i) the NPV and (ii) the PI criteria.