P7.7 (L02, 3, 5, 6, AN Hammi is preparing for a key meeting with a client who is considering several possible investment scenarios. His assistant, Evan, provided the following metrics for each of the proposals. \table[[, Option A, Option B, Option C, Option D, Option E], [Net initial investment, $200, 000, /bar ($ 1,100,000), $450,000, $300,000, $600,000 M N U P7.7 (LO 2, 3, 5, 6), AN Hammi is preparing for a key meeting with a client who is considering several possible investment scenarios. His assistant, Evan, provided the following metrics for each of the proposals. Net initial investment Option A $200,000 NPV of total investment (after-tax) $60,000 Option B Option C Option D Option E $1,100,000 $450,000 $300,000 $-$(70,000) $(10,000) $600,000 $54,000 Life of project (in years) 5 15 5 8 10 Simple payback period (in years, using before-tax cash flows) 2.9 8.6 5.0 6.0 6.0 IRR 17% 6% 0% 5% 8% ARR 11% 4% 0% 3% 5% Discounted payback period (in years, using after-tax cash flows) Profitability index 4 15 >5 >8 9 1.30 1.00 0.84 0.96 1.09 All projects were discounted at the same 6% WACC for the client; the client's effective tax rate of 28% was also consistently applied to each option. Required a. Evan begins his evaluation of the proposals by ranking the five options separately for each metric: NPV. IRR, ARR, and profitability index. Based on these four metrics, are there any investment options that should be disregarded right away? Explain why. b. For each option, compare the life of the project to its simple payback period and to its discounted payback period. Which projects show favorable results in regard to these two metrics? Do any show unfavorable results? c. Evan then classifies the metrics into two groups: present-value-based and non-present-value-based. Which metrics did he assign to each group? Why would he classify the metrics this way? d. Based on the quantitative metrics shown for each investment option, provide a list of advantages and disadvantages for each (a minimum of two positives and two negatives for each scenario should be provided, unless all are positive or negative). e. Which scenario would you most strongly recommend to the client, and why?