10. The following projects are available, but only one can be chosen. Project A An initial investment of $180,000 followed by profits of $30,000 in years one to four, $40,000 in years five to seven, and $50,000 in years eight to ten. Project B An initial investment of $335,000 followed by profits of $65,000 in years one to three, $85,000 in years four to six, and $110,000 in years seven to eight. Project C An initial investment of $372,000 followed by profits of $150,000 in years four to nine and a residual value of $70,000 in the ninth year. At a 16% cost of capital and using an appropriate decision-making technique, recommend which project should be selected. How much better is the chosen alternative over the worst alternative? b. If a new lower cost of capital equal to 11% is used, what decision do you reach? c. Repeat the two previous analyses with the following modifications: Project A Add a residual value of $100,000 in year 10. Project B Add a residual value of $60,000 in year 10. Project C Move the residual value from the ninth year to the tenth year. 11. The Banff Gondola is looking to increase its operational capacity through modifications to its gondola equipment. If it invests $2.3 million it can upgrade the motors, strengthen the necessary supports, and add an additional cable car to its line. The expected life of the project is eight years before the equipment will need to be replaced. Annual increased maintenance costs are $50,000 at the end of every year for four years and then $100,000 at the end of every year during the last four years. Because of construction and down times, Banff Gondola is forecasting a loss of $415,000 in the first year. Afterwards, it projects that the equipment will result in increased profits of $850,000 per year. a. What is the maximum cost of capital that will result in a break-even scenario? b. Calculate the net present value (use a cost of capital of 15%), internal rate of return, and the equivalent annual cash flow.