1A) Your firm has limited capital to invest and is therefore interested in comparing projects based on the profitability index (PI), as well as other measures. What is the PI of the project with the estimated cash flows below? The required rate of return is 16.7%. Round to 3 decimals. Year 0 cash flow = -810,000 Year 1 cash flow = -130,000 Year 2 cash flow = 440,000 Year 3 cash flow = 490,000 Year 4 cash flow = 530,000 Year 5 cash flow = 530,000

1B) Spacely Sprockets Inc is a new start-up evaluating a new project. They worry that they don't have all the requisite operating information they will need to estimate Cash Flows From Assets and that they wouldn't be able to evaluate this project based on NPV and IRR (which both use the CFFA's to evaluate). Instead they have decided to use the Average Accounting Return (AAR) rule to evaluate the project. What is the AAR for this project? (Enter your answer as a percentage and Round to 2 decimals)

Accounting Info for Spacely Sprockets

	Net Income	Book Value of Assets
Year 1	42,000	526,000
Year 2	52,000	607,000
Year 3	62,000	699,000

1C) What is the discount rate at which the following cash flows have a NPV of $0? Answer in %, rounding to 2 decimals. Year 0 cash flow = -149,000 Year 1 cash flow = 39,000 Year 2 cash flow = 30,000 Year 3 cash flow = 40,000 Year 4 cash flow = 30,000 Year 5 cash flow = 41,000 Year 6 cash flow = 37,000

ANSWER