A.) Waste Industries is evaluating a $56,900 project with the following cash flows.

Years		Cash Flows
1		$	9,240
2			15,800
3			21,200
4			25,400
5			33,200

The coefficient of variation for the project is 1.025.

Coefficient of Variation				Discount Rate
0		0.25			6	%
0.26		0.50			8	%
0.51		0.75			12	%
0.76		1.00			16	%
1.01		1.25			20	%

Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Select the appropriate discount rate.

• 6%

• 8%

• 12%

• 20%

• 16%

b. Compute the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)

c. Based on the net present value should the project be undertaken?

• Yes

• No

B.)

Allisons Dresswear Manufacturers is preparing a strategy for the fall season. One alternative is to expand its traditional ensemble of wool sweaters. A second option would be to enter the cashmere sweater market with a new line of high-quality designer label products. The marketing department has determined that the wool and cashmere sweater lines offer the following probability of outcomes and related cash flows.

	Expand Wool Sweaters Line							Enter Cashmere Sweaters Line
Expected Sales	Probability			Present Value of Cash Flows from Sales				Probability			Present Value of Cash Flows from Sales
Fantastic		0.4		$	226,000				0.3		$	366,000
Moderate		0.4			184,000				0.3			327,000
Low		0.2			93,300				0.4			0

The initial cost to expand the wool sweater line is $155,000. To enter the cashmere sweater line, the initial cost in designs, inventory, and equipment is $173,000. a. Calculate net present value if, Allisons Dresswear Manufacturers decides to: (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest whole dollar.)