a) What is the NPV of each project? Which projects should Xia undertake, and how much cash should it retain?b) What is the total value of Xia’s assets today?c) What cash flows will the investors in Xia receive? Based on these cash flows, what is the value of Xia today?d) Suppose Xia pays any unused cash to investors today, rather than investing it. What are the total cash flows to the investors in this case? What is the value of Xia now? Xia corporation is a firm whose sole assets are USD 100,000 in cash and three projects that itwill undertake. The projects are risk-free and have the following cash flows:ProjectCash Flow Today (USD)Cash flow in one year (USD)A-2000030000В-1000025000-6000080000Xia plans to invest any unused cash today at the risk-free interest of 10%. In one year, all cashwill be paid to investors, and the company will be shut down.

Answers (A) Calculation of Net present value of all three projects A, B and C NPVA = -20000 +…

Answered: a) What is the NPV of each project?…

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a) What is the NPV of each project? Which projects should Xia undertake, and how much cash should it retain?

b) What is the total value of Xia’s assets today?

c) What cash flows will the investors in Xia receive? Based on these cash flows, what is the value of Xia today?

d) Suppose Xia pays any unused cash to investors today, rather than investing it. What are the total cash flows to the investors in this case? What is the value of Xia now?

Xia corporation is a firm whose sole assets are USD 100,000 in cash and three projects that it
will undertake. The projects are risk-free and have the following cash flows:
Project
Cash Flow Today (USD)
Cash flow in one year (USD)
A
-20000
30000
В
-10000
25000
-60000
80000
Xia plans to invest any unused cash today at the risk-free interest of 10%. In one year, all cash
will be paid to investors, and the company will be shut down.

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