1.Primus Corp. is planning to convert an existing warehouse into a new plant that will increase its production capacity by 45 percent. The cost of this project will be $7,125,000. It will result in additional cash flows of $1,875,000 for the next eight years. The company uses a discount rate of 12 percent.

oWhat is the payback period?

oWhat is the NPV for the project?

oWhat is the IRR for the project?

2.Skywards Inc., an airline caterer, is purchasing refrigerated trucks at a total cost of $3.25 million. After-tax net income from this investment is expected to be $750,000 for the next five years. Annual depreciation expense was $650,000. The company's cost of capital is 15 percent.

oCompute the discounted payback for this project?

oCompute the NPV for this project

oCompute the IRR for this project

3.You are considering a project that has an initial outlay of $1million. The profitability index of the project is 2.24. What is the NPV of the project?

4.Identify the weaknesses of the payback period method.

5.Management of Franklin Mints, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of $312,500. They project that the cash flows from this investment will be $121,450 for the next seven years. If the appropriate discount rate is 14 percent, what is the NPV for the project?