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Dove ple has the following projects in which it can Invest Project Cash outlow at -0, Em Present value at t=0 of cash indows, Em NPV af -0, m A 2 5.5 3.5 B 2.5 7.1 4.6 C 2.5 3.8 1.3 D 5.1 10 4.9 E 6.9 21 14.1 Dove has no other investment opportunities. Projects A and B are mutually exclusive. The capital investment budget at t=0 is limited to 12.5 million Dove pic is committed to maximising the wealth of its shareholders. How should Dove utilise its capital investment budget if: () all projects are divisible (can be scaled down) (4 marks) (ii) all projects are indivisible? (4 marks) Vine Ltd manufactures transparent panels used in making garden buildings. The selling price per panel is 8.20 in the economy's good state and 5 60 in the bad state. The risk-neutral probability of each of these states is 0.5. Vine can sell all the panels that it produces The panels can be made from either two types of raw material, Acro and Poly. The cost per panel using Acro is 7 80 in the good state and 5.20 in the bad state, The cost per panel using Poly is 7.00 in the good state and 6.50 in the bad state Vine is committed to producing one million panels during the current year (year 1) using Acro and is planning its production for year 2. Assume a risk-free rate of zero. d) If Vine produces one million panels using Acro in year 2. what is the expected present value of the year 2 net cash flow? What is its expected present value it Vine uses Poly in year 2? (3 marks) Assume now that at the end of year 1. Vine will know the economy's state in year 2 (11) Assume that Vine produces one million panels in year 2 and can either continue using the raw material Acro, or switch to using Poly What is the expected value of the option to switch

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