I don't know how to solve these questions :( I need the answer and process . Thx

Corporate Finance HOMEWORK 1 (Due on Oct 6) You can submit your answers as an Excel spreadsheet, a Word (or.pdf) document, or a set of hand-written pages (scanned or in hard copy). You can email your answers to my TA (Ryu, Doowon at lyucreon@korea.ac.kr) before class on Oct 6 or hand in your answers at the start of the class that day. Problem 1 You are evaluating a set of 4 independent projects, whose annual cash flows are summarized in the table below (all figures are in $). Assume that the annual discount rate is 15% for all projects, and that all cash flows occur at the end of the year. Please consider each statement independently. project 1 project 2 project 3 project 4 CF0 -55,000 -40,000 -40,000 -15,000 CF1 25,000 17,000 12,000 48,100 CF2 27,000 20,000 140,000 -45,200 CF3 29,000 22,000 -115,000 11,500 a) Compute the regular payback period (in years and months) for project (1) and the discounted payback period (in years and months) for project (2). b) Suppose that you need to make an accept/reject decision for each independent project based solely on the IRR criterion and the discount rate. For each project, please show how you would reach your accept/reject decision based on the IRR criterion or explain why you would not be able to do so. c) Now suppose that you are limited to a maximum initial investment of $55,000. Which project or a combination of projects would you implement under this capital constraint to maximize the total value created for the firm? What will be the impact (in dollars) on firm value? You can invest in a particular project only once. Problem 2 As the owner of a toy factory, you are considering an investment in the production of a new toy helicopter called Sky Citadel. The introduction of the toy requires an investment in 100 new machines costing $16,000 each. Installing each machine costs an additional $2,000. Each machine will be depreciated according to the straight-line method toward a salvage value of $1,000. The life of the project is estimated to be 4 years, after which each machine will be sold for $1,200. The production facility will be located on a site currently owned by your company. If the project is not accepted, this space could be rented for $350,000 per year (with rental payments coming at the end of each year). The project also requires a one-time initial investment in net working capital in the amount of $220,000, which will be recovered at the end of the project's life in year 4. To evaluate the attractiveness of this project, you have completed a feasibility study, which cost you $80,000. According to the results of this study, you expect to sell 40,000 toys each year during the project's life at the price of $80 per toy. Production costs are estimated to be $20 per toy. In addition to these variable costs, you expect to incur $1,000,000 per year in advertising expenditures to support the sales of Sky Citadel. Among your staff, your firm currently employs an office manager and an accountant. The annual salaries of the office manager and the accountant are $60,000 and $75,000, respectively, and you plan to continue using their services over the next 4 years and maintain the same level of their compensation, which is not expected to change as a result of this project. Finally, the results of your study indicate that the introduction of Sky Citadel will cannibalize the sales of other toys currently produced by your firm and erode their combined after-tax cash flow by $120,000 per year. If the discount rate is 12% and the tax rate is 30%, what are the NPV and the IRR for this project? Would you recommend proceeding with this investment? Hint: 1. The firm has to estimate the salvage value of an asset for straight-line depreciation. However, as we learned in class, the actual price for which the asset is eventually sold at the end of the project does not have to be exactly equal to the estimated salvage value, since it is difficult to forecast the true selling price many years in advance. In this assignment, assume that the firm estimated the machine salvage value to be $1,000 for depreciation purposes (in the mini-case in the lecture, we assumed full depreciation, so this figure was 0), but eventually sold each asset for $1,200 at the end of its life. Therefore, the annual depreciation will be [(18,000-1,000)*100 machines /4yrs] and at year 4, the taxes on the gain from machine sale will be (100 machines) * (0.30) * ($1,200 - $1,000). 2. Opportunity costs and advertising expenses can be regarded in a similar manner as the production costs in how they affect the operating cash flow