A.

Dog Up! Franks is looking at a new sausage system with an installed cost of $304,200. This cost will be depreciated straight-line to zero over the project's 9-year life, at the end of which the sausage system can be scrapped for $46,800. The sausage system will save the firm $93,600 per year in pretax operating costs, and the system requires an initial investment in net working capital of $21,840.

Required:

If the tax rate is 33 percent and the discount rate is 9 percent, what is the NPV of this project?

rev: 09_18_2012

$126,860.65

$148,362.71

$141,297.82

$138,644.91

$153,082.08

B.

What is the IRR of the following set of cash flows?

Year	Cash Flow
0	$10,835
1	4,700
2	4,400
3	6,700

rev: 09_18_2012

20.08%

19.68%

19.08%

21.08%

20.48%

C.

Consider an asset that costs $237,600 and is depreciated straight-line to zero over its 11-year tax life. The asset is to be used in a 6-year project; at the end of the project, the asset can be sold for $29,700.

Required :

If the relevant tax rate is 33 percent, what is the aftertax cash flow from the sale of this asset? (Do not round your intermediate calculations.)

rev: 09_18_2012

$58,315.95

$19,899.00

$431,553.00

$55,539.00

$52,762.05