1) A colleague asks for your help in finding the discount rate where the NPV=0 for a set of cash flows. You quickly recall that this is the IRR for a project. Answer in %, rounding to 2 decimals.

Year 0 cash flow = -109,000

Year 1 cash flow = 43,000

Year 2 cash flow = 35,000

Year 3 cash flow = 36,000

Year 4 cash flow = 37,000

2) A colleague asks for your help in finding the discount rate where the NPV=0 for a set of cash flows. You quickly recall that this is the IRR for a project. Answer in %, rounding to 2 decimals.

Year 0 cash flow = -101,000

Year 1 cash flow = 33,000

Year 2 cash flow = 40,000

Year 3 cash flow = 38,000

Year 4 cash flow = 42,000

3) Your firm has limited capital to invest and is therefore interested in comparing projects based on the profitability index (PI), as well as other measures. What is the PI of the project with the estimated cash flows below? The required rate of return is 16.2%. Round to 3 decimals.

Year 0 cash flow = -810,000

Year 1 cash flow = -160,000

Year 2 cash flow = 400,000

Year 3 cash flow = 430,000

Year 4 cash flow = 470,000

Year 5 cash flow = 370,000

4) The secondary industrial robot on line 3 broke down again today. The production engineer got it back on line, but says it needs a major overhaul or replacing. Should we fix or replace it? Another analyst is getting quotes and other information about potential replacements, while you analyze the expected repair cash flows.

Working with the production engineer, you estimate that the cost to repair will be $138,000 and that the remaining life of the machine would be about 3 years. The cost to maintain and operate the machine for those 3 years is expected to increase over time. The $ amounts below are the expected after-tax cash flows for the existing machine (including the overhaul cost), if it is repaired.

Its replacement would have a longer expected life than 3 years. Therefore, you plan to evaluate fix versus replace using EAC (equivalent annual cost). The discount rate for the analysis is 10.6%. Assume 3 years is the "best life" for EAC evaluation of the existing machine. Enter your answer (the EAC) as a positive number, rounded to 2 places.

Year 0 cash flow = -138,000

Year 1 cash flow = -74,000

Year 2 cash flow = -94,000

Year 3 cash flow = -103,000