A. Axis Corp. is studying two mutually exclusive projects. Project Kelvin involves an overhaul of the existing system; it will cost $53,500 and generate cash inflows of $24,500 per year for the next 3 years. Project Thompson replaces the existing system; it will cost $210,000 and generate cash inflows of\ $50,000 per year for 6 years. Using a(n) 10.62% cost of capital, calculate each project's NPV, and make a recommendation based on your findings.

B. Billabong Tech uses the internal rate of return (IRR) to select projects. Calculate the IRR for each of the following projects and recommend the best project based on this measure. Project T-Shirt requires an initial investment of $13,167 and generates cash inflows of $5,500 per year for 5 years. Project Board Shorts requires an initial investment of $27,000 and produces cash inflows of $11,000 per year for 6 years.

C.

Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is$18,250, and the project is expected to yield after-tax cash inflows of $4,000 per year for 7 years. The firm has a cost of capital of 10%.

a.Determine the net present value (NPV) for the project.

b.Determine the internal rate of return (IRR) for the project.

c.Would you recommend that the firm accept or reject the project?