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 $95,000 and will generate net cash inflows of $19,000 per year for 9 years.

a.What is the project's NPV using a discount rate of 8 percent? Should the project be accepted? Why or why not?

b.What is the project's NPV using a discount rate of 13 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. Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,500,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1.1million. Thus, in year 6 the investment cash inflow totals

$3,100,000. Calculate the project's NPV using a discount rate of 10 percent.

If the discount rate is 10 percent, then the project's NPV is: