1. Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.10 million. This investment will consist of $2.00 million for land and $10.10 million for trucks and other equipment. The land, all trucks, and all other equipment are expected to be sold at the end of 10 years for a price of $5.00 million, which is $2.40 million above book value. The farm is expected to produce revenue of $2.05 million each year, and annual cash flow from operations equals $1.85 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment.

2. A beauty product company is developing a new fragrance named Happy Forever. There is a probability of 0.46 that consumers will love Happy Forever, and in this case, annual sales will be 1.00 million bottles; a probability of 0.36 that consumers will find the smell acceptable and annual sales will be 174,000 bottles; and a probability of 0.18 that consumers will find the smell unpleasant and annual sales will be only 52,000 bottles. The selling price is $39, and the variable cost is $8 per bottle. Fixed production costs will be $1.05 million per year, and depreciation will be $1.20 million. Assume that the marginal tax rate is 40 percent. What are the expected annual incremental after-tax free cash flows from the new fragrance?