1. Refer to Tables 1 through 4. Add up the total increase in aftertax income for each project.Given what you know about Kay Marsh, to which project do you think she will be attracted?2. Compute the payback period, internal rate of return (IRR), net present value (NPV), andprofitability index of all four alternatives based on cash flow. Use 10% for the discount rate inyour calculations.3. a. According to the payback method, which project should be selected?b. What are the disadvantages of this method?4. a. According to the IRR method, which project should be chosen?b. What are the major disadvantages of the IRR method?c. If Kay had not put a limit on the size of the capital budget, would the IRR method allowacceptance of all four alternatives? If not, which one(s) would be rejected and why?5. a. According to the NPV method, which project should be chosen? How does this differfrom the answer under the IRR?b. If Kay had not put a limit on the size of the capital budget, under the NPV methodwhich projects would be accepted? Do the NPV and IRR both reject the sameproject(s)? Why?c. Given all the facts of the case, are you more likely to select Project A or C?
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