Q. 1) Explain how much importance should be given to the energy cost situation?

2) Illustrate what is the project’s cost of equity? Illustrate what is the appropriate discount factor to use for evaluating the refrigerator project?

3) Which of the two engines should be used in the transit bus if you decide to go ahead with the project and Explain why?

4) Forecast the project’s cash flows for the next twenty years. Illustrate what assumptions did you use?

5) Use the appropriate capital budgeting techniques to evaluate the project.

6) Use the average demand scenario to evaluate the sensitivity of the project’s NPV with respect to sale price of the refrigerator and the cost of the compressor.

7) Based on the scenario and sensitivity analysis you performed above, comment on the overall riskiness of the project.

8) Would you recommend that California Trucks accept or reject the project? Illustrate what is the basis for your recommendation?