1. The Bruin's Den Outdoor Gear is considering a new 7-year project to produce a new tent line. The equipment necessary would cost $1.99 million and be depreciated using straight-line depreciation to a book value of zero. At the end of the project, the equipment can be sold for 10 percent of its initial cost. The company believes that it can sell 31,000 tents per year at a price of $79 and variable costs of $38 per tent. The fixed costs will be $545,000 per year. The project will require an initial investment in net working capital of $253,000 that will be recovered at the end of the project. The required rate of return is 12.2 percent and the tax rate is 21 percent. What is the NPV?

A) $857,095

B) $464,069

C) $1,359,837

D) $882,949

E) $659,061

2. Cirice Corporation is considering opening a branch in another state. The operating cash flow will be $176,600 a year. The project will require new equipment costing $598,000 that would be depreciated on a straight-line basis to zero over the 5-year life of the project. The equipment will have a market value of $181,000 at the end of the project. The project requires an initial investment of $42,000 in net working capital, which will be recovered at the end of the project. The tax rate is 21 percent. What is the project's IRR?

• 15.64%

• 18.39%

• 17.57%

• 18.48%

• 13.24%