7. Maxwell Software, Inc., has the following mutually exclusive projects.

Year		Project A		Project B
0		?$29,000		?$32,000
1		16,500		17,500
2		13,000		11,500
3		3,800		13,000

a-1.	Calculate the payback period for each project. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)

	Payback period
Project A	years
Project B	years

a-2.

Which, if either, of these projects should be chosen?

	Project A
	Project B
	Both projects
	Neither project

b-1.	What is the NPV for each project if the appropriate discount rate is 14 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

	NPV
Project A	$
Project B	$

b-2.

Which, if either, of these projects should be chosen if the appropriate discount rate is 14 percent?

	Project A
	Project B
	Both projects
	Neither project

8. Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $3 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which it will be worthless. The project is estimated to generate $2,180,000 in annual sales, with costs of $875,000. The tax rate is 30 percent and the required return is 9 percent.

What is the project?s NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

NPV

$

9. The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 40 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project.

	Year 0	Year 1	Year 2	Year 3	Year 4
Investment	$	37,000
Sales revenue			$	19,000	$	19,500	$	20,000	$	17,000
Operating costs				4,000		4,100		4,200		3,400
Depreciation				9,250		9,250		9,250		9,250
Net working capital spending		430		480		530		430		?

a.	Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.)

	Year 1	Year 2	Year 3	Year 4
Net income	$	$	$	$

b.	Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

	Year 0	Year 1	Year 2	Year 3	Year 4
Cash flow	$	$	$	$	$

c.	Suppose the appropriate discount rate is 12 percent. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

NPV

$

7. Maxwell Software, Inc., has the following mutually exclusive projects. Year 0 1 2 3 Project A -$29,000 16,500 13,000 3,800 Project B -$32,000 17,500 11,500 13,000 a-1. Calculate the payback period for each project. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Payback period years Project A years Project B a-2. Which, if either, of these projects should be chosen? Project A Project B Both projects Neither project b-1. What is the NPV for each project if the appropriate discount rate is 14 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project A Project B NPV $ $ b-2. Which, if either, of these projects should be chosen if the appropriate discount rate is 14 percent? Project A Project B Both projects Neither project 8. Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $3 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which it will be worthless. The project is estimated to generate $2,180,000 in annual sales, with costs of $875,000. The tax rate is 30 percent and the required return is 9 percent. What is the project's NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) $ NPV 9. The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 40 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Investment Sales revenue Operating costs Depreciation Net working capital spending $ Year 0 37,000 Year 1 $ 430 19,000 $ 4,000 9,250 480 Year 2 19,500 $ 4,100 9,250 530 Year 3 20,000 $ 4,200 9,250 430 Year 4 17,000 3,400 9,250 ? a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) Year 1 $ Net income Year 2 $ Year 3 $ Year 4 $ b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) Year 0 Cash flow $ Year 1 $ Year 2 $ Year 3 $ Year 4 $ c. Suppose the appropriate discount rate is 12 percent. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $