1. Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $18,000, and that for the pulley system is $22,000. The firm's cost of capital is 14%. After-tax cash flows, including depreciation, are as follows:

Year	Truck		Pulley
1	$5,100		$7,500
2	5,100		7,500
3	5,100		7,500
4	5,100		7,500
5	5,100		7,500

a. Calculate the IRR for each project. Round your answers to two decimal places.

Truck: %

Pulley: % Calculate the NPV for each project. Round your answers to the nearest dollar, if necessary. Enter each answer as a whole number. For example, do not enter 1,000,000 as 1 million.

Truck: $ Pulley: $ Calculate the MIRR for each project. Round your answers to two decimal places.

Truck: %

Pulley: %

2.Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,500 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $8,000 per year for 5 years.

a. Calculate the two projects' NPVs, assuming a cost of capital of 14%. Round your answers to the nearest cent.

Project S	$
Project L	$

b. Calculate the two projects' IRRs. Round your answers to two decimal places.

Project S	%
Project L	%

c. Calculate the two projects' MIRRs, assuming a cost of capital of 14%. Round your answers to two decimal places.

Project S	%
Project L	%

d. Calculate the two projects' PIs, assuming a cost of capital of 14%. Round your answers to two decimal places.

Project S
Project L

3.The Ewert Exploration Company is considering two mutually exclusive plans for extracting oil on property for which it has mineral rights. Both plans call for the expenditure of $10.5 million to drill development wells. Under Plan A, all the oil will be extracted in 1 year, producing a cash flow at t = 1 of $13.5 million; under Plan B, cash flows will be $2 million per year for 20 years.

a. What are the annual incremental cash flows that will be available to Ewert Exploration if it undertakes Plan B rather than Plan A? (Hint: Subtract Plan A's flows from B's.)

Year	Incremental Cash Flow (B - A)
1	$
2-20	$

b. If the company accepts Plan A and then invests the extra cash generated at the end of Year 1, what rate of return (reinvestment rate) would cause the cash flows from reinvestment to equal the cash flows from Plan B? Round your answer to two decimal places. %

1. Identify each project's IRR. Round your answers to two decimal places.

Project A	%
Project B	%

1. Indicate the crossover rate. Round your answer to two decimal places. %

4. The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs $11 million but realizes after-tax inflows of $5 million per year for 4 years. After 4 years, the machine must be replaced. Machine B costs $13 million and realizes after-tax inflows of $3.5 million per year for 8 years, after which it must be replaced. Assume that machine prices are not expected to rise because inflation will be offset by cheaper components used in the machines. The cost of capital is 14%.

a. By how much would the value of the company increase if it accepted the better machine? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places. $ million