1) A company is considering a 4-year project with the following cash flows: C0 = -$20,000 C1 = C2 = C3 = C4 = $7,000 If the companys opportunity cost of capital is 12%, then compute the following for the project: a) the projects NPV b) the projects IRR c) determine if the project will have more than 1 IRR d) The projects PI e) Should the project be rejected because its payback period is longer than two years? f) Should the project be rejected because its IRR is greater than its required rate of return?

2) Dr. Superhook, a private towing contractor, has an opportunity for a towing contract with the city over the next 5 years. The contract calls for the city to pay Dr. Superhook $4,000,000 at the start of the contract and nothing for the remainder of the contract. Dr. Superhook estimates that its expenses will be $1,200,000 at the end of each of the 5 years If Dr. Superhook uses IRR to evaluate its opportunities, under what values of the discount rate would the company accept the contract? Briefly explain why.