1) The following are the cash flows of two projects:

Year Project A Project B

0 $ (380 ) $ (380 )

1 210 280

2 210 280

3 210 280

4 210

If the opportunity cost of capital is 11%, what is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Project profitability index

A

B

2) A new computer system will require an initial outlay of $14,950, but it will increase the firm's cash flows by $3,300 a year for each of the next 6 years.

a.Calculate the NPV and decide if the system is worth installing if the required rate of return is 8%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Net Present Value

Worth Installing

b.Calculate the NPV and decide if the system is worth installing if the required rate of return is 13%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Net Present Value

Worth Installing

c. How high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

Maximum Discount rate

3) Here are the cash flows for a project under consideration:

C₀ C₁ C₂

$7,440 +$5,340 +$19,080

a.Calculate the project's net present value for discount rates of 0, 50%, and 100%. (Round your answers to the nearest whole dollar.)

discount rate NPV

0%

50%

100%

b. What is the IRR of the project? (Do not round intermediate calculations. Enter your answer as a whole percent.)

IRR