You are the head of Corporate Investments for Everspring, Corp., which has a cost of capital (discount rate) of 10%. You are deciding on whether to invest your firms money in the three projects below. All cash flows for each project are shown; all projects are abandoned after Year 5.

Project A Project B Project C Initial Investment ($100,000) ($500,000) ($6,500,000) Year 1 $30,000 ($100,000) $1,000,000 Year 2 $40,000 $200,000 $1,500,000 Year 3 $50,000 $200,000 $2,000,000 Year 4 $60,000 $200,000 $2,500,000 Year 5 $70,000 $200,000 $3,000,000

1. Assume each years cash flows occur evenly over the year. If your required payback period is 30 months, in which projects would you invest?

2. Assume each years cash flows occur at the end of the year. What is the net present value (NPV) of Project A?

3. Assume each years cash flows occur at the end of the year. What is the internal rate of return (IRR) of Project B?

4. Assume each years cash flows occur at the end of the year. What is the profitability index (PI) of Project C?