1. You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $14,000 to purchase and which will have OCF of $1,200 annually throughout the vehicles expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $20,000 to purchase and which will have OCF of $650 annually throughout that vehicles expected 4-year life. Both cars will be worthless at the end of their life. You intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future. If the business has a cost of capital of 12 percent, calculate the EAC. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

Scion's EAC
Tayota's EAC

2. You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $57,000, has a 5-year life, and has an annual OCF (after-tax) of $10,000 per year. The Keebler CookieMunster costs $90,000, has a 7-year life, and has an annual OCF (after-tax) of $8,000 per year. If your discount rate is 12 percent, what is each machines EAC? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

3. KADS, Inc. has spent $450,000 on research to develop a new computer game. The firm is planning to spend $250,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $55,000. The machine has an expected life of three years, a $80,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $650,000 per year, with costs of $300,000 per year. The firm has a tax rate of 21 percent, an opportunity cost of capital of 13 percent, and it expects net working capital to increase by $125,000 at the beginning of the project. What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

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FCF