Calculating Payback. An investment project provides cash inflows of $700 per year for 8 years. a. b. What is the project payback period if the initial cost is $3,400? What if it is $5,800? Calculating AAR. You are trying to determine whether to expand your business by building new manufacturing plant. The plant has an installation cost of $13,000,000, which will be depreciated straight-line to zero over its 4- year life. If the plant has the following projected net income over these 4 years, what is the project average accounting return (AAR)? Yr 1 $1,210,000; Yr 2: $1,720,000: Yr 3: $1,465,000; Yr 4: $1,313,000 Calculating IRR. ABC Limited evaluates all of its projects by applying the IRR rule. If the required return is 18%, should ABC accept the following project? Yr 0-$90,000; Yr 1: $35,000: Yr 2: $43,000; Yr 3: $40,000 Calculating NPV. For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 9%, should the firm accept this project? Calculating PI & NPV The Multigig Computer Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (1) Cash Flow (2) 0 -15 000 - 2 000 1 8 500 2 500 2 8 500 2 500 3 8 500 2 500 (a) If the required rate is 9% and Multigig Computer applies the profitability index decision rule, which project should the firm accept? (b) If the company applies NPV decision rule, which project should it take?