1.

The following are the cash flows of two projects:

Year	Project A	Project B
0	$400	$400
1	230	300
2	230	300
3	230	300
4	230

a.	Calculate the NPV for both projects if the discount rate is 10%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Project	NPV
A	$
B

b.

Suppose that you can choose only one of these projects. Which would you choose?

	Project B
	Project A
	Neither

2.

Your landscaping company can lease a truck for $7,500 a year (paid at year-end) for 6 years. It can instead buy the truck for $36,000. The truck will be valueless after 6 years. The interest rate your company can earn on its funds is 7%.

a.	What is the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value of lease $

b.

Is it cheaper to buy or lease?

	Buy
	Lease

c-1.	What if the lease payments are an annuity due, so the first payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value of lease $

c-2.

Is it cheaper to buy or lease?

	Buy
	Lease