6.Suppose your firm is considering investing in a project with the cash flows shown as follows, and that the required rate of return on projects of this risk class is 7 percent.

Time 0 123456

Cash flow -125,00075,000105,000105,00078,00055,00025,000

Use the NPV decision rule to evaluate this project; should it be accepted or rejected? Show your calculations for the NPV.

7.Roberts and Company are considering investing in a project to streamline their production process.The cash flows are shown below.The required rate of return for projects of this class is 8%.

Time 0 123456

Cash flow -200,00055,00065,00010,00035,00025,00010,000

Use the NPV decision rule to evaluate this project; should it be accepted or rejected? Show your calculations for the NPV.

8.Given the date in question 7 above, Roberts and Company now estimates that the cash flow in year 1 will be 100,000 instead of 55,000.Calculate the IRR.Based on the IRR calculation should the project be accepted?Show your IRR calculations.

9.Our firm is considering investing in two mutually exclusive projects.Projects A and project B.The cash flows for each project are shown below.

Project A

Time 0 123456

Cash flow -250,000100,000125,00075,00055,00025,00010,000

Project B

Time 0 123456

Cash flow -200,00055,000165,00010,00035,00035,00012,000

Calculate the payback for each project.Based on the payback, which project should be accepted?Show your calculations.

10.Smith and Company is considering investing in a machine that will lower production costs.They want your recommendation regarding the investment.Should they invest or not?The cash flows shown below.The maximum allowable payback is 4 years.Based on the payback method alone, should the project be accepted?Explain your answer.

Time 0 1 2 3 4 5

Cash Flow -$1,000 $350 $480 $520 $300 $100

11.Jones and Company has requested your assistance in calculating the IRR for project A.Compute the IRR for Project A and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.

Project E

Time 0 1 2 3 4 5

Cash Flow -$1,000 $350 $480 $520 $300 $100

12.The firm of Apple and Company is considering the purchase of a machine.What would be the firms breakeven point in units given the data below?Show your calculations.

FC = 40

P = 3

VC = .80