4. Refer to Figures 1 through 3. Add up the total increase in after-tax income for each project. Given what you know about Kay Marsh, to which project do you think she will be attracted?

2. Compute the payback period, net present value (NPV), Profitability Index of all four alternatives based on cash flow. Use 10 % the required rate of return (discount rate) in your calculations. For the payback method, merely indicate the year in which the cash flow equals or exceeds the initial investment. You do not have to compute midyear points.

Year 5 Figure 4 Financial analysis of Project D: Add fleet of trucks Initial Year 1 Year 2 Year 3 Year 4 Expenditures Net cost of new trucks $510,000 Additional revenue ...... $382,500 $325,125 $ 89.250 $ 76,500 Additional operating costs 19.125 19,125 25.500 31.875 Depreciation.. 76.500 112.200 107.100 107.100 Net increase in income 286,875 193,800 (43,350) (62.475) Less: Tax at 33% 94.669 63.954 0 0 Increase in aftertax income $192.206 $129.846 (S_43.350) ($ 62.475) Add back depreciation $ 76,500 $112.200 $107,100 107,100 Net change in cash flow. (5510,000) 268,706 242,046 63.750 44.625 $ 51,000 38.250 107.100 (94,350) 0 S 94.350) $107,100 12,750