1. Fijisawa Inc. is considering a major expansion of its product line and has estimated the following free cash flows associated with such an expansion. The initial outlay would be $1,800,000, and the project would generate incremental free cash flows of $550,000 per year for 6 years. The appropriate required rate of return is 7 percent.

a. Calculate the NPV. b. Calculate the PI.

c. Calculate the IRR. d. Should this project be accepted?

2. You are considering a project with an initial cash outlay of $70,000 and expected free cash flows of $24,000 at the end of each year for 7 years. The required rate of return for this project is 7 percent.

a. What is the project's payback period? b. What is the project's NPV? c. What is the project's PI? d. What is the project's IRR?

3. Jella Cosmetics is considering a project that costs $900,000 and that is expected to last for 8 years and produce future free cash flows of $165,000 per year. If the appropriate discount rate for this project is 7 percent, what is the project's IRR?

4. Calculate the NPV given the following free cash flows, if the appropriate required rate of return is 15 percent. Should the project be accepted?

Year CF

0 -60,000

1 20,000

2 20,000

3 20,000

4 -20,000

5 20,000

6 20,000