1. Biogood Food is considering two investments. Each costs $10,000 but they have different cash flows which are below. Compute the payback period for each. Year Project A Project B 1 $12,000 $10,000 2 8,000 6,000 3 6,000 16,000 2. The Easter Tree Company plans to purchase a new machine that will increase its manufacturing speed and save the company money. The cost of this machine is $66,000. The annual cash flow projections are below. If the cost of capital is 10 percent, what is the net present value? Year Cash Flow 1........................................ $21,000 2........................................ 29,000 3........................................ 36,000 4........................................ 16,000 5........................................ 8,000 3. The company where you work has a weighted average cost of capital of 15%. The IRR on a project is 16%. Would it be profitable to invest? 4. Calculate the payback period for Marress Company's new project. The project's initial after tax cost is $5,000,000. Its expected after-tax operating cash inflows are $1,800,000 in year 1, $1,900,000 in year 2, $700,000 in year 3 and $1,800,000 in year 4 5. Here are the details for Kat Cos proposed project. Calculate its NPV. Assume that the cost of capital is 15 percent and that the after tax cost of starting the project is $5,000,000. It will provide after-tax operating cash inflows as shown below. (Carefully consider whether or not they are losing money on this project.) Year 1: $1,800,000 Year 2: $1,900,000 Year 3: $1,700,000 Year 4: $1,300,000 6. Calhoun plans a new project. Calculate its IRR. The initial after tax cost is $5,000,000. The project is expected to provide after-tax operating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2, $1,700,000 in year 3 and $1,300,000 in year 4? 7. Mario Kat, Inc plans a new project. Calculate its IRR. Assume that its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of ($1,800,000) in year 1, $2,900,000 in year 2, $2,700,000 in year 3 and $2,300,000 in year 4?

8. DML Industries bought a new manufacturing system 3 years ago for $80,000. It is being depreciated under MACRS with a 5-year recovery period. Assume a 21% tax rate. Use the depreciation table below to calculate the book value of the machine. 9. What is the initial purchase price of an asset that has a book value of $34,800 and has total accumulated depreciation of $85,200. 10. Look at the following outlays and identify whether each is normally considered a capital expenditure or an operating expenditure. a. An outlay of $4,000,000 for a major research and development program b. An outlay of $3,200 for computer paper and toner. c. An outlay of $4,000 for a marketing report on possible sales next month. d. An outlay of $1,750,000 to purchase copyrights from an author