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1.You are a financial analyst at HE PLC and are evaluating a setof risky investment project, some features of which are notedbelow:Project IDInvestment OutlayPresent Value of Future Cash FlowsA14001875B22502800C21001800D32504425E42005500The investment outlay and presentvalue of the future cash flows are in millions. There is a limitedbudget of £6,250 million, such that all the projects cannot bechosen for investment and if need be, you can invest in fractionsof a project. With supporting calculations, make yourrecommendation on the portfolio of projects that maximises the netpresent value for the company.You own a small manufacturing operation that currentlygenerates revenues of £2 million per year. Next year, based upon apending decision by the government whether to award you a long-termgovernment contract, your revenues will either increase by 30% ordecrease by 25%, with equal probability, and stay at that level aslong as you continue operations. Running costs are £1.6 million peryear. Your cost of capital is 10% per annum.If you can sell the plant at any timeto a large conglomerate for £5 million. What is the value of yourcompany today?Discuss the role of real options in the valuation of acompany.