1. 
2. A project requires equipment costing $2,000,000 and net working capital of $2,500,000. Revenues would increase by $2,800,000 and expenses would increase $1,200,000. The firm uses MACRS depreciation, and the equipment qualifies as a 5 year asset. The project has an 8 year useful life. At the end of the projects life, you expect to be able to sell the equipment for $350,000. The tax rate is 40%, and cost of capital is 12%. Calculate the NPV, MIRR and Profitability Index. Is the project acceptable?

TABLE 1 MACRS Half-Year Convention Depreciation Rate for Recovery Period Year 3-year 5-year 7-year 10-year 15-year 20-year 33.33 20.00 14.29 10.00 5.00 3.750 1 2 44.45 32.00 24.49 18.00 9.50 7.219 3 14.81 19.20 17.49 6.677 14.40 8.55 4 7.41 11.52 12.49 11.52 7.70 6.177 8.93 5 11.52 9.22 6.93 5.713 6 5.76 8.92 7.37 6.23 5.285 7 6.55 8.93 5.90 4.888 8 6.55 5.90 4.522 4.46 9 6.56 5.91 4.462 4.461 10 6.55 5.90 11 3.28 5.91 4.462 12 5.90 4.461 13 5.91 4.462 4.461 14 5.90 4.462 15 5.91 16 2.95 4.461 4.462 17 4.461 18 19 4.462 20 4.461 21 2.231