1.

Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of

$105,000

and will generate net cash inflows of

$19,000

per year for

8

years.

a.What is the project's NPV using a discount rate of

7

percent?

Should the project be accepted? Why or why not?

b.What is the project's NPV using a discount rate of

14

percent? Should the project be accepted? Why or why not?

c.What is this project's internal rate of return? Should the project be accepted? Why or why not?

2. What is the internal rate of return for the following project: An initial outlay of

$10,500

resulting in a single cash inflow of

$20,990

in

9

years.

3. Determine the internal rate of return on the following project: An initial outlay of

$10,500

resulting in a cash inflow of

$2,496

at the end of each year for the next

8

years.