(a) NPV unequal lives: Grady enterprises is looking at two project opportunities for a parcel of land the company currently owns. The first project is a restaurant and the second project is a sports facility. The projected cash flow of the restaurant is an initial cost of $1, 440, 000 with cash flows over the next six years of $250, 000 (year 1), $280, 000 (year 2), $300, 000 (year 3-5) and $1, 770, 000 (year 6) at which point Grady plans to sell the restaurant. The sports facility has the initial cost of $2, 480, 000. Cash flows over the next four years of $400, 000 (year 1-3), $2, 670, 000 (year 4) at which point Grady intends to sell the facility. If the appropriate discount rate for the restaurant is 9.5% and the appropriate discount rate for the sports facility is 11. 5%, use the NPV to determine which project Grady should choose for the parcel of land. Adjust this NPV for unequal lives with the equivalent annual annuity. Does the decision change? If the appropriate discount rate of the restaurant is 9.5%, what is the NPV of the restaurant project?

(b) Quark industries has three potential projects all with an initial cost of $2, 400, 000. Given the discount rate and the future cash flow of each project, what are the IRRs and MIRRs of the three projects for quark industries?

Cash flow Project M Project N Project O

Year 1 $600, 000 $800, 000 $1, 300, 000

2 $600, 000 $800, 000 $1, 000, 000

3 $600, 000 $800, 000 $ 900, 000

4 $600, 000 $800, 000 $ 700, 000

5 $600, 000 $800, 000 $ 500, 000

Discount rate 9% 11% 18%

What is the IRR for project M?