1. A company is evaluating a proposal that has an initial investment of $50,000 and has cash flows of $16,000 per year for five years. Calculate the payback period of the project. If the company's maximum acceptable payback period is 3 years, should the company accept the project?

2. Tangshan Mining Company is considering investing in a new mining project. The company's cost of capital is 12 percent, and the project is expected to have an initial cost of $5,000,000. In addition, the project is expected to provide after-tax operating cash flows of $2,500,000 in year 1, $2,300,000 in year 2, $2,200,000 in year 3, and $1,000,000 in year 4.

(a) Calculate the NPV of the project.

(b) Should the firm make the investment?

3. A company is evaluating two projects X and Z. Project X has an initial investment of $80,000 and cash inflows at the end of each of the next five years of $25,000. Project Z has an initial investment of $120,000 and cash inflows at the end of each of the next five years of $40,000. Assume a cost of capital of 9%. Which project(s) should the firm accept if

a) projects X and Z are independent?

(b) projects X and Z are mutually exclusive?