For question 5: What is the answer to this and how do you use the CF function on the Financial calculator?

Same thing for question 7:

For question 14 where do they get the 0.65 from?

Same for question 17, where are they getting the 0.6?

Thank you!

5. What is the IRR of the project above? If the cost of capital is 15%, apply the IRR rule to accept or reject this project. The IRR is the discount rate at which the NPV of the project is equal to 0. In other words, IRR satisfies the following equation: 4, 000 4,000 4, 000 4,000 0 s-10,000+ 1 IRR (1 + IRR)2 (1+ IRR)3 (1 + IRR) To determine the IRR that satisfies the above equation, we have to use the financial calculator: CFo -10,000 CF1-4,000 CF2-4,000 CF3-4,000 CF4 4,000 Compute IRR-21.86%. Or PV--1 0,000; PMT = 4,000; N = 4; FV-0; Solve for I/YR and find 21.86%. Applying the IRR rule: IRR-21.86% > Cost of Capital 15%. Accept the project. e Sisyphean Company is planning on investing in a new project. This will involve machinery costing $450,000. The Sisyphean Company expects 7. Th the purchase of some new cash inflows from this project as detailed below Year 1 $200,000 $225,000 $275,000 $200,000 The appropriate discount rate for this project is 16%. What is the internal rate of return (IRR) for this project? Should the company invest in this project using the IRR rule? Year 2 Year 3 Year 4 200, 000 225, 000 275,000 1 + IRR + (1 + IRR-t (1 + IRR)3 200,000 0 450,000 (1 + RR). ur CFo -450,000 CFi 200,000 CF2 225,000 CF: = 275,000 CF4 200.000; Compute IRR 34.1 20%. Applying the IRR rule: IRR-34.12% > Cost of Capital-16%. Accept the project. 14. CathFoods will release a new range of candies which contain anti-oxidants. New equipment to manufacture the candy will cost $2 million, which will be depreciated by straight-line depreciation over five years. It is expected that the range of candies will bring in revenues of $4 million per year for five years with production and support costs of $1.5 million per year. If CathFood's marginal tax rate is 35%, what are the incremental earnings in the second year of this project? A) S1.365 million B) $1.500 million C) $1.753 million D) $2.100 million Depreciation S2/5-0.4 Incremental EBIT S4 $1.5 - $0.4 S2.1; Incremental Earnings after tax $2.1 x 0.65 = $1.365 million 17. Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $6 million to buy the machine and $10,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional S3 million. The machine is expected to raise gross profits by $4 million per year, starting at the end of the first year, with associated costs of S1 million for each of those years. The machine is expected to have a working life of six years and will be depreciated over those six years. The marginal tax rate is 40%. What are the incremental free cash flows associated with the new machine in year 2? A) $1,001.667 B) $ 1 ,298,91 7 C) $2,200,667 D) $3,247,834 Depreciation (6,000,000 + 10,000) / 6-1 ,001 ,667; EBIT in year 2 4,000,000 1,000,000 1,001,667 1,998,333; Incremental Earnings 1,998,333 x (0.6) 1,199,000; Add back depreciation to incremental earnings to get $2,200,667