1.)Frank is looking for a new sausage system with an installed cost k390, 000.This cost will be depreciated straight-line to zero over the Project's life 5-year life, at the end of which the sausage system can be scraped for k60, 000. The system will save the firm k120, 000 per year in the pre-tax operating costs and the system requires an initial investment in net working capital of k28, 000. if the tax rate is 34% and the discount rate is 10%, what is the NPV of this project?

2.Consider that leads plc is financed by a combination of debt and equity. The book value of equity is 3.5 million and it has 1.5 million shares outstanding. Leeds Plc shares current dividend is at 2.6 which grows at 6% forever. The rate of return demanded by its shareholders on equity is 12%. The value of Leeds plc's outstanding debt is 2 million and the cost of debt 8%. There is corporate tax of 40%. You are required to estimate the WACC of leeds plc.

3.the difficulty with capital budgeting is not in deciding whether to use NPV, IRR or any other evaluation technique but in identifying suitable projects and estimating their cash flows. Evaluate this statement. As part of your answer consider:

i.) why NPV and IRR may be preferred to other techniques such as payback and accounting rate of return.

ii.)why NPV is generally preferred to IRR and how NPV may be interpreted.