1 A project has an initial cost of $39,025, expected net cash inflows of $14,000 per year for 11 years, and a cost of capital of 8 What is the project's NPV (Hint Begin by constructing a time line ) Do not round your intermediate calculations Round your answer to the nearest cent 2 A project has an initial cost of $50,000, expected net cash inflows of $12,000 per year for 8 years, and a cost of capital of 14 What is the project's IRR Round your answer to two decimal places 3 A project has an initial cost of $44,900, expected net cash inflows of $15,000 per year for 8 years, and a cost of capital of 8 What is the project's MIRR Round your answer to two decimal places 4 A project has an initial cost of $65,075, expected net cash inflows of $12,000 per year for 12 years, and a cost of capital of 8 What is the project's PI Do not round your intermediate calculations Round your answer to two decimal places 5 A project has an initial cost of $53,550, expected net cash inflows of $10,000 per year for 8 years, and a cost of capital of 11 What is the project's payback period Round your answer to two decimal places 6 A project has an initial cost of $53,550, expected net cash inflows of $10,000 per year for 8 years, and a cost of capital of 11 What is the project's payback period Round your answer to two decimal places 7 Your division is considering two investment projects, each of which requires an up front expenditure of $15 million You estimate that the investments will produce the following net cash flows Year Project A Project B 1 $4,000,000 $20,000,000 2 10,000,000 10,000,000 3 20,000,000 6,000,000 What are the two projects' net present values, assuming the cost of capital is 5 Round your answers to the nearest dollar Project A $Project B $What are the two projects' net present values, assuming the cost of capital is 10 Round your answers to the nearest dollar Project A $Project B $What are the two projects' net present values, assuming the cost of capital is 15 Round your answers to the nearest dollar Project A $Project B $ Whatarethetwoprojects'IRRsatthesesamecostsofcapital Roundyouranswerstotwodecimalplaces ProjectA ProjectB 8 Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget The projects are independent The cash outlay for the truck is $18,000, and that for the pulley system is $22,000 The firm's cost of capital is 14 After tax cash flows, including depreciation, are as follows Year Truck Pulley 1 $5,100 $7,500 2 5,100 7,500 3 5,100 7,500 4 5,100 7,500 5 5,100 7,500 Calculate the IRR for each project Round your answers to two decimal places Truck What is the correct accept reject decision for this project Select AcceptRejectItem 2Pulley What is the correct accept reject decision for this project Select AcceptRejectItem 4 Calculate the NPV for each project Round your answers to the nearest dollar, if necessary Enter each answer as a whole number For example, do not enter 1,000,000 as 1 million Truck $What is the correct accept reject decision for this project Select AcceptRejectItem 6Pulley $What is the correct accept reject decision for this project Select AcceptRejectItem 8 CalculatetheMIRRforeachproject Roundyouranswerstotwodecimalplaces Truck Whatisthecorrectaccept rejectdecisionforthisproject Select AcceptRejectItem10Pulley Whatisthecorrectaccept rejectdecisionforthisproject Select AcceptReject 9 Davis Industries must choose between a gas powered and an electric powered forklift truck for moving materials in its factory Since both forklifts perform the same function, the firm will choose only one (They are mutually exclusive investments ) The electric powered truck will cost more, but it will be less expensive to operate it will cost $21,000, whereas the gas powered truck will cost $17,230 The cost of capital that applies to both investments is 11 The life for both types of truck is estimated to be 6 years, during which time the net cash flows for the electric powered truck will be $6,100 per year and those for the gas powered truck will be $5,300 per year Annual net cash flows include depreciation expenses Calculate the NPV for each type of truck Round your answers to the nearest dollar Electric powered truck $ Gas powered truck $ CalculatetheIRRforeachtypeoftruck Roundyouranswerstotwodecimalplaces Electric poweredtruck Gas poweredtruck Whichtypeofthetruckshouldthefirmpurchase Select Electric poweredGas powered 10 Talbot Industries is considering launching a new product The new manufacturing equipment will cost $12 million, and production and sales will require an initial $2 million investment in net operating working capital The company's tax rate is 35 What is the initial investment outlay Write out your answer completely For example, 2 million should be entered as 2,000,000 $ The company spent and expensed $150,000 on research related to the project last year Would this change your answer Select YesNoItem 2 Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using The building could be sold for $1 5 million after taxes and real estate commissions How would this affect your answer The project's cost will Select increasedecreasenot changeItem 3 11 The financial staff of Cairn Communications has identified the following information for the first year of the roll out of its new proposed service Projected sales $25 million Operating costs (not including depreciation) 8 million Depreciation 4 million Interest expense 3 million The company faces a 35 tax rate What is the project's operating cash flow for the first year (t 1) Write out your answer completely For example, 2 million should be entered as 2,000,000 12 Allen Air Lines must liquidate some equipment that is being replaced The equipment originally cost $19 million, of which 85 has been depreciated The used equipment can be sold today for $5 7 million, and its tax rate is 40 What is the equipment's after tax net salvage value Write out your answer completely For example, 2 million should be entered as 2,000,000 13 Although the Chen Company's milling machine is old, it is still in relatively good working order and would last for another 10 years It is inefficient compared to modern standards, though, and so the company is considering replacing it The new milling machine, at a cost of $42,000 delivered and installed, would also last for 10 years and would produce after tax cash flows (labor savings and depreciation tax savings) of $9,200 per year It would have zero salvage value at the end of its life The firm's WACC is 10 , and its marginal tax rate is 35 Should Chen buy the new machine 14 Wendy's boss wants to use straight line depreciation for the new expansion project because he said it will give higher net income in earlier years and give him a larger bonus The project will last 4 years and requires $600,000 of equipment The company could use either straight line or the 3 year MACRS accelerated method Under straight line depreciation, the cost of the equipment would be depreciated evenly over its 4 year life (ignore the half year convention for the straight line method) The applicable MACRS depreciation rates are 33 33 , 44 45 , 14 81 , and 7 41 The company's WACC is 8 , and its tax rate is 35 What would the depreciation expense be each year under each method Year Scenario 1 (Straight Line) Scenario 2 (MACRS) 1 $ $ 2 $ $ 3 $ $ 4 $ $ WhichdepreciationmethodwouldproducethehigherNPV Select Scenario1Scenario2Item9Howmuchhigherwoulditbe Roundyouranswertothenearestdollar $ 15 The Campbell Company is considering adding a robotic paint sprayer to its production line The sprayer's base price is $1,130,000, and it would cost another $23,500 to install it The machine falls into the MACRS 3 year class (the applicable MACRS depreciation rates are 33 33 , 44 45 , 14 81 , and 7 41 ), and it would be sold after 3 years for $650,000 The machine would require an increase in net working capital (inventory) of $12,500 The sprayer would not change revenues, but it is expected to save the firm $387,000 per year in before tax operating costs, mainly labor Campbell's marginal tax rate is 30 What is the Year 0 net cash flow $ What are the net operating cash flows in Years 1, 2, and 3 Round your answers to the nearest dollar Year 1 $ Year 2 $ Year 3 $ What is the additional Year 3 cash flow (i e, the after tax salvage and the return of working capital) Round your answer to the nearest dollar $ If the project's cost of capital is 15 , what is the NPV of the project Round your answer to the nearest dollar $ Should the machine be purchased Select YesNo

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1. A project has an initial cost of $39,025, expected net cash inflows of $14,000 per year for 11 years, and a cost of capital

1. A project has an initial cost of $39,025, expected net cash inflows of $14,000 per year for 11 years, and a cost of capital of 8%. What is the project's NPV? (Hint:Begin by constructing a time line.) Do not round your intermediate calculations. Round your answer to the nearest cent.

2.A project has an initial cost of $50,000, expected net cash inflows of $12,000 per year for 8 years, and a cost of capital of 14%. What is the project's IRR? Round your answer to two decimal places.

3.A project has an initial cost of $44,900, expected net cash inflows of $15,000 per year for 8 years, and a cost of capital of 8%. What is the project's MIRR? Round your answer to two decimal places.

4.A project has an initial cost of $65,075, expected net cash inflows of $12,000 per year for 12 years, and a cost of capital of 8%. What is the project's PI? Do not round your intermediate calculations. Round your answer to two decimal places.

5.A project has an initial cost of $53,550, expected net cash inflows of $10,000 per year for 8 years, and a cost of capital of 11%. What is the project's payback period? Round your answer to two decimal places.

6.A project has an initial cost of $53,550, expected net cash inflows of $10,000 per year for 8 years, and a cost of capital of 11%. What is the project's payback period? Round your answer to two decimal places.

Your division is considering two investment projects, each of which requires an up-front expenditure of $15 million. You estimate that the investments will produce the following net cash flows:

Year	Project A	Project B
1	$4,000,000	$20,000,000
2	10,000,000	10,000,000
3	20,000,000	6,000,000

What are the two projects' net present values, assuming the cost of capital is 5%? Round your answers to the nearest dollar.Project A $Project B $What are the two projects' net present values, assuming the cost of capital is 10%? Round your answers to the nearest dollar.Project A $Project B $What are the two projects' net present values, assuming the cost of capital is 15%? Round your answers to the nearest dollar.Project A $Project B $
Whatarethetwoprojects'IRRsatthesesamecostsofcapital?Roundyouranswerstotwodecimalplaces.ProjectA%ProjectB%
8.

Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $18,000, and that for the pulley system is $22,000. The firm's cost of capital is 14%. After-tax cash flows, including depreciation, are as follows:

Year	Truck	Pulley
1	$5,100	$7,500
2	5,100	7,500
3	5,100	7,500
4	5,100	7,500
5	5,100	7,500

Calculate the IRR for each project. Round your answers to two decimal places.Truck:%What is the correct accept/reject decision for this project?-Select-AcceptRejectItem 2Pulley:%What is the correct accept/reject decision for this project?-Select-AcceptRejectItem 4
Calculate the NPV for each project. Round your answers to the nearest dollar, if necessary. Enter each answer as a whole number. For example, do not enter 1,000,000 as 1 million.Truck: $What is the correct accept/reject decision for this project?-Select-AcceptRejectItem 6Pulley: $What is the correct accept/reject decision for this project?-Select-AcceptRejectItem 8
CalculatetheMIRRforeachproject.Roundyouranswerstotwodecimalplaces.Truck:%Whatisthecorrectaccept/rejectdecisionforthisproject?-Select-AcceptRejectItem10Pulley:%Whatisthecorrectaccept/rejectdecisionforthisproject?-Select-AcceptReject

Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Since both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments.) The electric-powered truck will cost more, but it will be less expensive to operate; it will cost $21,000, whereas the gas-powered truck will cost $17,230. The cost of capital that applies to both investments is 11%. The life for both types of truck is estimated to be 6 years, during which time the net cash flows for the electric-powered truck will be $6,100 per year and those for the gas-powered truck will be $5,300 per year. Annual net cash flows include depreciation expenses.

Calculate the NPV for each type of truck. Round your answers to the nearest dollar.

Electric-powered truck $

Gas-powered truck $
CalculatetheIRRforeachtypeoftruck.Roundyouranswerstotwodecimalplaces.

Electric-poweredtruck %

Gas-poweredtruck %

Whichtypeofthetruckshouldthefirmpurchase?-Select-Electric-poweredGas-powered

10.

Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $12 million, and production and sales will require an initial $2 million investment in net operating working capital. The company's tax rate is 35%.

What is the initial investment outlay? Write out your answer completely. For example, 2 million should be entered as 2,000,000.$
The company spent and expensed $150,000 on research related to the project last year. Would this change your answer?-Select-YesNoItem 2
Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.5 million after taxes and real estate commissions. How would this affect your answer?The project's cost will-Select-increasedecreasenot changeItem 3.

11.

The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service:

Projected sales	$25 million
Operating costs (not including depreciation)	8 million
Depreciation	4 million
Interest expense	3 million

The company faces a 35% tax rate. What is the project's operating cash flow for the first year (t = 1)? Write out your answer completely. For example, 2 million should be entered as 2,000,000.

12.Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $19 million, of which 85% has been depreciated. The used equipment can be sold today for $5.7 million, and its tax rate is 40%. What is the equipment's after-tax net salvage value? Write out your answer completely. For example, 2 million should be entered as 2,000,000.

13.Although the Chen Company's milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $42,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $9,200 per year. It would have zero salvage value at the end of its life. The firm's WACC is 10%, and its marginal tax rate is 35%. Should Chen buy the new machine?

14.

Wendy's boss wants to use straight-line depreciation for the new expansion project because he said it will give higher net income in earlier years and give him a larger bonus. The project will last 4 years and requires $600,000 of equipment. The company could use either straight-line or the 3-year MACRS accelerated method. Under straight-line depreciation, the cost of the equipment would be depreciated evenly over its 4-year life (ignore the half-year convention for the straight-line method). The applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. The company's WACC is 8%, and its tax rate is 35%.

What would the depreciation expense be each year under each method?

Year Scenario 1 (Straight Line) Scenario 2 (MACRS)

1 $ $

2 $ $

3 $ $

4 $ $
WhichdepreciationmethodwouldproducethehigherNPV?-Select-Scenario1Scenario2Item9Howmuchhigherwoulditbe?Roundyouranswertothenearestdollar.$

15.

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,130,000, and it would cost another $23,500 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $650,000. The machine would require an increase in net working capital (inventory) of $12,500. The sprayer would not change revenues, but it is expected to save the firm $387,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 30%.

What is the Year-0 net cash flow?$
What are the net operating cash flows in Years 1, 2, and 3? Round your answers to the nearest dollar.

Year 1 $

Year 2 $

Year 3 $
What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital)? Round your answer to the nearest dollar.$
If the project's cost of capital is 15 %, what is the NPV of the project? Round your answer to the nearest dollar.$ Should the machine be purchased?-Select-YesNo