21. Two projects being considered by a firm are mutually exclusive and have the following projected cash flows: Year 0 1 2 3 Project A Cash Flow ($100,000) 39,500 39,500 39,500 Project B Cash Flow ($100,000) 0 0 133,000 information given, which of Based only on the preferred, and why? the two projects would be 22. Genuine Products Inc. requires a new machine. Two companies have submitted bids, and you have been assigned the task of choosing one of the machines. Cash flow analysis indicates the following: Year 0 1 2 3 4 Machine A Cash Flow -$2,000 0 0 0 3,877 Machine B Cash Flow -$2,000 832 832 832 832 What is the internal rate of return for each machine? 23. Your company is considering two mutually exclusive projects, X and Y, Whose costs and cash flows are shown below: Year 0 1 2 3 4 Project x Cash Flow -$2,000 200 600 800 1,400 Project Y Cash Flow - $2,000 2,000 200 100 75 The projects are equally risky, and the firm's cost of capital is 12 percent. You must make a recommendation, and you must base it on the modified IRR (MIRR). What is the MIRR of the better project? 24. King Racing Company (KRC) is considering which of two mutually exclusive engine development projects to pursue. King's RPX design has an expected life of 4 years and projected cash inflows are $3.6 million at the end of each of the first two years and $1.8 million in each of the next two years. King's RPB design is more flexible and has an eight-year life. The projected end-of-year flows from the RPB design are $2.4 million in each of the first two years and $2.0 million in each of the next six years. Both projects require an initial investment of $5.4 million, and King's cost of capital is 12 percent. Frequent changes in racing rules and engine technology make engine development risky, but King feels that the basic designs can be refined and modified. Thus, King often assumes that continuous replacements can be made as a project's life ends. What is the net present value (on an eight-year extended basis of the project with the most value to the company? 25 Mills Corp. is considering adopting one of two machines. Machine A requires an up-front expenditure at t = 0 of $450,000. Machine A has an expected life of two years, and will generate positive after-tax cash flows of $350,000 per year (all cash flows are realized at the end of the year). At the end of two years, the machine will have zero salvage value. Every two years the company can purchase a replacement machine with identical cash flows. Alternatively, Machine B requires an expenditure of $1 million at t = 0. Machine B has an expected life of four years, and will generate positive after-tax cash flows of $350,000 per year (all cash flows are realized at year end). At the end of four years, Machine B will have an after-tax salvage value of $100,000. The cost of capital is 10 percent. What is the net present value (on an extended four-year life) of the better machine