8-27 NPV, Payback (LO1, LO4) A project that costs $2,200 to install will provide annual cash flows of $570 for the next 5 years. The firm accepts projects with payback periods of less than 4 years. a. What is this project's payback period? (Round your answer to 3 decimal places.) b. Will the project be accepted? c-1. What is project NPV if the discount rate is 3%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) c-2. Should this project be pursued? d-1. What is project NPV if the discount rate is 10%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) d-2. Should this project be pursued? e. Will the firm's decision change as the discount rate changes? Answer is complete but not entirely correct. a. Payback period 3.860 Years b. Will the project be accepted? Yes C- 1. NPV of the project if the discount rate is 3% $ 410.43 C- Should this project be pursued? Yes 2. d- NPV of the project if the discount rate is 10% $ 39.25 1. d- 2. Should this project be pursued? No e. Will the firm's decision change as the discount rate changes? Yes 4 Problem 8-18 IRR (LO2) 8.33 points Marielle Machinery Works forecasts the following cash flows on a project under consideration. It uses the internal rate of return rule to accept or reject projects. Skipped -$11,400 CH B +$8.900 +$9.900 eBook Print a. What is the project's IRR? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) IRR References b. Should this project be accepted if the required return is 14%? Yes No 00 8 8.33 points Problem 8-25 Profitability Index versus NPV (LO3) Consider projects A and B with the following cash flows: C A B -$33 58 +$17 +33 42 +$17 C +$17 + 33 + 33 a-1. What is the NPV of each project if the discount rate is 10%? (Do not round intermediate calculations. Round your answers to 2 decimal places.) a-2. Which project has the higher NPV? b-1. What is the profitability index of each project? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b-2. Which project has the higher profitability index? c. Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects? d. Which project is most attractive to a firm that is limited in the funds it can raise? a 1. NPV of each project if the discount rate is 10% a 2 Which project has the higher NPV? b 1 Profitability index of each project b- 2. Which project has the higher profitability index? Answer is complete but not entirely correct. Project A Project B S 25.28 $ 24.07 Project A S 0.77 $ 0.42 Project A CL Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects? d. Which project is most attractive to a firm that is limited in the funds it can raise? Both Project A