1. A project will produce an operating cash flow of $703,000 a year for three years. The initial cash outlay for equipment will be $1,420,000. The net aftertax salvage value of $47,000 will be received at the end of the project. The project requires $66,000 of net working capital that will be fully recovered. What is the net present value of the project if the required rate of return is 10 percent?

a. $347,155.52

b. $342,216.71

c. $338,560.20

d. $333,762.29

e. $328,432.94

2. Assume a machine costs $460,000 and lasts five years before it is replaced. The operating cost is $52,500 a year. Ignore taxes. What is the equivalent annual cost if the required rate of return is 11 percent? (Hint: the EAC should account for both initial investment and annual operating costs)

a. $191,204.81

b. $183,344.25

c. $180,645.23

d. $176,962.34

e. $165,221.87