10-8. Lin McAdam and Lola Manners, managers of the Winchester Company, do not practice capital rationing. They have three independent projects they are evaluating for inclusion in this year's capital budget. One is for a new machine to make rifle stocks. The second is for a new forklift to use in the warehouse. The third project involves the purchase of automated packaging equipment. The Winchester Company's required rate of return is 13%. The initial investment (a negative cash flow) and the expected positive net cash flows for years 1 through 4 for each project follow:

Expected Net Cash Flow

Year Stock Fork Pack

0 ($9,000) ($12,000) ($18,200)

1 $2,000 $5,000 $0

2 $5,000 $4,000 $5,000

3 $1,000 $6,000 $10,000

4 $4,000 $2,000 $12,000

Calculate the NPV andIRRof each project.

Which proejct(s) should be undertaken? Why?