1. A project has an initial cost of $65,000, expected net cash inflows of $13,000 per year for 10 years, and a cost of capital of 13%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to the nearest cent.

$ ---------------------

2. A project has an initial cost of $40,000, expected net cash inflows of $8,000 per year for 10 years, and a cost of capital of 12%. What is the project's IRR? Round your answer to two decimal places.

-------------%

3. A project has an initial cost of $70,000, expected net cash inflows of $12,000 per year for 6 years, and a cost of capital of 13%. What is the project's MIRR? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.

-----------------%

4. A project has an initial cost of $45,000, expected net cash inflows of $12,000 per year for 11 years, and a cost of capital of 10%. What is the project's PI? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.

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5. A project has an initial cost of $40,000, expected net cash inflows of $14,000 per year for 9 years, and a cost of capital of 13%. What is the project's payback period? Round your answer to two decimal places.

-------------------- years

6. A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. What is the project's discounted payback period? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.

-----------years

7. Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below:

Year	X		Y
0	-$5,000		-$5,000
1	1,000		4,500
2	1,500		1,500
3	2,000		1,000
4	4,000		500

The projects are equally risky, and their cost of capital is 14%. You must make a recommendation, and you must base it on the modified IRR (MIRR). Calculate the two projects' MIRRs. Do not round intermediate calculations. Round your answers to two decimal places.

Project X: %

Project Y: %

Which project has the higher MIRR?

-Select------- has the higher MIRR.

8. NPV and IRR Analysis

After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to go ahead and develop the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that could result in environmental damage. Before proceeding with the extraction, CTC must spend $900,000 for new mining equipment and pay $165,000 for its installation. The mined gold will net the firm an estimated $350,000 each year for the 5-year life of the vein. CTC's cost of capital is 19%. For the purposes of this problem, assume that the cash inflows occur at the end of the year.

1. What is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest dollar. Use a minus sign to enter negative value, if any.

   $

   What is the project's IRR? Do not round intermediate calculations. Round your answer to two decimal places.

   %

2. Should this project be undertaken if environmental impacts were not a consideration?

   -Select-YesNoItem 3

3. How should environmental effects be considered when evaluating this, or any other, project?

   I. Environmental effects should be ignored since they would have no effect on the project's profitability. II. Environmental effects should be treated as sunk costs. III. Environmental effects could be added by estimating penalties or any other cash outflows that might be imposed on the firm to help return the land to its previous state (if possible).

   -Select-------

9. NPV and IRR Analysis

Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows:

	Expected Net Cash Flows
Year	Project A		Project B
0	-$430		-$680
1	-528		210
2	-219		210
3	-150		210
4	1,100		210
5	820		210
6	990		210
7	-325		210

1. Select the correct graph for NPV profiles for Projects A and B.

   The correct graph is -Select-graph Agraph Bgraph Cgraph DItem 1 .

2. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places.

   Project A: %

   Project B: %

3. Calculate the two projects' NPVs, if each project's cost of capital was 11%. Do not round intermediate calculations. Round your answers to the nearest cent.

   Project A: $

   Project B: $

   Which project, if either, should be selected?

   -Select------------ should be selected.

   Calculate the two projects' NPVs, if each project's cost of capital was 16%. Do not round intermediate calculations. Round your answers to the nearest cent.

   Project A: $

   Project B: $

   What would be the proper choice?

   -Select------------ is the proper choice.

4. What is each project's MIRR at a cost of capital of 11%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places.

   Project A: %

   Project B: %

   What is each project's MIRR at a cost of capital of 16%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places.

   Project A: %

   Project B: %

5. What is the crossover rate? Do not round intermediate calculations. Round your answer to two decimal places.

   %

   What is its significance?

   I. If the cost of capital is greater than the crossover rate, both the NPV and IRR methods will lead to the same project selection. II. If the cost of capital is less than the crossover rate, both the NPV and IRR methods lead to the same project selections. III. The crossover rate has no significance in capital budgeting analysis.

   -Select-----