1. Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirements below.

   Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows.

   1. Cuenca Company is considering the purchase of new equipment that will speed up the process for producing flash drives. The equipment will cost $7,200,000 and have a life of 5 years with no expected salvage value. The expected cash flows associated with the project follow:

      Year		Cash Revenues		Cash Expenses
      1		$8,000,000		$6,000,000
      2		8,000,000		6,000,000
      3		8,000,000		6,000,000
      4		8,000,000		6,000,000
      5		8,000,000		6,000,000

   2. Kathy Shorts is evaluating an investment in an information system that will save $240,000 per year. She estimates that the system will last 10 years. The system will cost $1,248,000. Her company's cost of capital is 10%.
   3. Elmo Enterprises just announced that a new plant would be built in Helper, Utah. Elmo told its stockholders that the plant has an expected life of 15 years and an expected IRR equal to 25%. The cost of building the plant is expected to be $2,880,000.

   Required:

   1. Calculate the IRR for Cuenca Company. The company's cost of capital is 16%. Round your answer to the nearest percent. fill in the blank 1 %

   Should the new equipment be purchased?

   YesNo

   2. Calculate Kathy Short's IRR. Round your answer to the nearest percent. fill in the blank 3 %

   Should she acquire the new system?

   YesNo

   3. What should be Elmo Enterprises' expected annual cash flow from the plant? Round your answer to the nearest dollar. $fill in the blank 5