1. Your company is planning to purchase a new log splitter for its lawn and garden business. The new splitter has an initial investment of $198,000. It is expected to generate $30,000 of annual cash flows, provide incremental cash revenues of $153,064, and incur incremental cash expenses of $100,000 annually.

What is the payback period and accounting rate of return (ARR)? Round your answers to 1 decimal place.

Payback period	___ years
ARR	___%

2.

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Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value.

	Project X	Project Y
Initial investment	$242,963	$172,991
Net cash flows anticipated:
Year 1	81,000	34,000
Year 2	59,000	54,000
Year 3	92,000	71,000
Year 4	82,000	67,000
Year 5	77,000	27,000

Compute the IRR for both projects using the IRR spreadsheet function.

Project X	___%
Project Y	___%