Hello, I need help with these few questions

Consider the following two mutually exclusive projects:

YearCash Flow (A)Cash Flow (B)

0$364,000$52,000

146,00025,000

268,00022,000

368,00021,500

4458,00017,500

Whichever project you choose, if any, you require a return of 11 percent on your investment.

1.If you apply the payback criterion, which investment will you choose? Why?(10%)

2.If you apply the NPV criterion, which investment will you choose? Why?(10%)

3.If you apply the IRR criterion, which investment will you choose? Why?(10%)

4.If you apply the profitability index criterion, which investment will you choose? Why?(10%)

5.Based on your answers in (1) through (4), which project will you finally choose? Why?(10%)

QUESTION 2:

The company is considering a new four-year expansion project that requires an initial investment in manufacturing machinery of $1,670,000. The machinery will be depreciated straight-line to zero over its four-year tax life (depreciation rate is 25% per year). At the end of the project, the machinery can be sold for 26% of its original cost. The project requires an initial investment in net working capital of $198,000; all of which will be recovered at the end of the project. The project is estimated to generate $1,850,000 in annual sales; with annual costs of $1,038,000. The tax rate is 21 percent and the required return for the project is 16.4%.

Instructions:

1.Calculate initial outlay (total cash flow in Year 0).(5%)

2.Calculate after-tax salvage value.(5%)

3.Complete the pro forma and determine total cash flows for each year of project's life.(25%)

4.Calculate the NPV of the project.(5%)

5.Calculate the IRR of the project.(5%)

6.Explain your decision whether you recommend to accept or reject the project.(5%)

Year

0

1

2

3

4

Sales

Costs

Depreciation

EBIT

Taxes

Net income

Operating Cash Flow

Capital spending

Net Working Capital

After-tax salvage value

Total cash flow