1. A company is considering the purchase of a new computer. Computer A would cost $300,000 and have operating costs of $60,000 per year. Computer B would cost $200,000 and have operating costs of $80,000 per year. Both computers will last 10 years, be depreciated on a straight-line basis and have no salvage value. The company's marginal tax rate is 50% and the cost of capital is 10%. What is the present value of the total after-tax cost for each computer? Which computer should the company purchase? 2. A firm has two mutually exclusive projects. X and Y. The company's cost of capital is 10%. The cash flows for the two projects are as follows. Year 0 -$17,500 -$17,500 Year 1 $7,000 Project X Project Y Year 2 $7,000 $3,500 Year 3 $7,000 $7,000 Year 4 $7,000 $21,000 0 Compute the NPV and IRR for each project. Determine the terminal value for each project with a reinvestment rate of 7%. Determine the modified rate of return and the modified IRR, assuming a reinvestment rate of 7% occurs. 3. Two mutually exclusive projects have the following cash flows. Year 5 Year 0 -$3,200 $3,200 Project E Project F Year 1 $1,600 $ 400 Year 2 $1,600 $ 800 Year 3 $800 $800 Year 4 $400 $800 0 $2,455 Rank the project by the following methods: (a) Payback (b) Average rate of return (C) NPV at 10% (d) IRR