This question has 4 parts please answer them step by step for a child to understand Alberta Limited is considering two mutually exclusive projects The relevant cash flows for each project are shown in the table below Project Ajax Project Eden Initial Investment $55,000 $60,000 Year Net Cash Inflows 1 $22,000 $35,000 2 $22,000 $25,000 3 $22,000 $20,000 4 $22,000 $15,000 Define the terms mutually exclusive projects and independent projects Determine the payback period of each project If the company has the maximum acceptable payback period of three years, which project(s) should the company invest in Explain why Suppose the company has a cost of capital of 12 Determine the Net Present Value (NPV) of each project Which project is preferred in this situation and why The finance manager at Alberta Limited is considering using the following equation to determine the risk adjusted discount rate for each project ( RADRj ) ( RADRj ) R F b j ( k m R F ) Where RF Risk free rate of return b j Beta for project j k m Cost of capital Suppose the risk free rate ( R F ) observed in the market is 8 and the market rate of return ( k is 14 The beta ( b , which is a measure of risk, for project Ajax is 0 75 and the beta for project Eden is 2 0 Determine the risk adjusted net present value for each project Which project is preferred in this situation and why

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This question has 4 parts please answer them step by step for a child to understand. Alberta Limited is considering two mutually exclusive projects. The

This question has 4 parts please answer them step by step for a child to understand.

Alberta Limited is considering two mutually exclusive projects. The relevant cash flows for each project are shown in the table below.

	Project Ajax	Project Eden
Initial Investment	$55,000	$60,000

Year	Net Cash Inflows
1	$22,000	$35,000
2	$22,000	$25,000
3	$22,000	$20,000
4	$22,000	$15,000

Define the terms mutually exclusive projects and independent projects.

Determine the payback period of each project. If the company has the maximum acceptable payback period of three years, which project(s) should the company invest in? Explain why.

Suppose the company has a cost of capital of 12%. Determine the Net Present Value (NPV) of each project. Which project is preferred in this situation and why?
The finance manager at Alberta Limited is considering using the following equation to determine the risk-adjusted discount rate for each project.

(RADRj)

RF + [bj (km - RF )]

Where:

RF	=	Risk-free rate of return
bj	=	Beta for project j
km	=	Cost of capital.

Suppose the risk-free rate (RF ) observed in the market is 8% and the market rate of return (k is 14%. The beta (b, which is a measure of risk, for project Ajax is 0.75 and the beta for project Eden is 2.0. Determine the risk-adjusted net present value for each project. Which project is preferred in this situation and why?