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3-(38 points) You are a financial analyst for CloudSoft Corp. The company is considering three...

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Finance

$3 - (38$ points $)$ You are a financial analyst for CloudSoft Corp. The company is considering three software projects: Project Stratus, Project Cumulus, and Project Cirrus.

Cash Flow Projections $($ in thousands $)$ :

Project Stratus $(5 -$ year duration $)$ :

Year Inflows Outflows

Y $0 0 180$

Y $1 50 20$

Y $2 60 25$

Y $3 70 30$

Y $4 55 22$

Y $5 60 24$

Project Cumulus $(4 -$ year duration $)$ :

Year Inflows Outflows

Y $0 0 150$

Y $1 30 10$

Y $2 40 12$

Y $3 45 14$

Y $4 38 13$

Project Cirrus $(6 -$ year duration $)$ :

Year Inflows Outflows

Y $0 0 90$

Y $1 40 15$

Y $2 42 16$

Y $3 45 17$

Y $4 48 18$

Y $5 50 20$

Y $6 52 22$

a $.$ Calculate the NPV for each project given a rate of return of $18 % .$

b $.$ Rank the projects based on their NPV $.$ Which one should CloudSoft Corp. prioritize?

c $.$ For Project Stratus and Project Cirrus, determine the year in which each project breaks even based on cumulative net cash flows. Which project has a quicker return on investment?

d $.$ How would your recommendation change if the company's required rate of return suddenly increased to $20 % ?$ Calculate and analyze the new NPVs for each project.

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