Mutually exclusive Projects	Project A	Project B	Project C
Initialcash Outlay	       (50,000)	      (60,000)	       (40,000)
RequiredRate of Return	11%	8%	13%
Cash Flows:	?	?	?
Inflow Year 1	10,000	30000	8,000
Inflow Year 2	15,000	50000	20,000
Inflow Year 3	20,000	5000	20,000
Inflow Year 4	25,000	5000	20,000
Inflow Year 5	30,000	2000	15,000

Step 1

Your first assignment as a financial analysis manager atCaledonia Products is to evaluate three new capital budgetproposals. You have been asked to do the project analysiscalculations and make a recommendation as to which project thecompany should accept. You will be calculating the NetPresent Value, the Internal Rate of Return, the Profitability Indexand the Pay Back Period for each of the three Projects.Because this is your first big project, you must also respond toseveral key questions aimed at assessing your understanding of thecapital budgeting process. looking at ranking various possibleprojects. List one factor you should consider in this decision.

1. Do the analysis calculations and submit them with yourresponse.
2. Recommend which project to accept.
3. Answer the following questions:

    a. Why is the capital budgeting process soimportant?    b.  What are the advantagesand disadvantages of using the Pay Back Periodmethod?    c. What are the advantages anddisadvantages of using the Net Present Valuemethod?    d. What are the advantages anddisadvantages of using the Internal Rate of Returnmethod?    e. What are the advantages anddisadvantages of using the Profitability Index method?