(i)

The following are the cash flows of two independent projects:

Year Project A Project B

0 $(370) $(370)

1 200 270

2 200 270

3 200 270

4 200

a.If the opportunity cost of capital is 10%, calculate the NPV for both projects.(Do not round intermediate calculations. Round your answers to 2 decimal places.)

b.Which of these projects is worth pursuing?

Project A

Project B

Both

Neither

(ii)

The following are the cash flows of two projects:

Year Project A Project B

0 $(210) $(210)

1 90 110

2 90 110

3 90 110

4 90

a.Calculate the NPV for both projects if the discount rate is 12%.(Do not round intermediate calculations. Round your answers to 2 decimal places.)

b.Suppose that you can choose only one of these projects. Which would you choose?

Project A

Project B

Neither

(iii)

The following are the cash flows of two projects:

Year Project A Project B

0 $(400) $(400)

1 230 300

2 230 300

3 230 300

4 230

If the opportunity cost of capital is 10%, what is the profitability index for each project?(Do not round intermediate calculations. Round your answers to 4 decimal places.)

(iiii)

The following are the cash flows of two projects:

Year Project A Project B

0 $(260) $(260)

1 140 160

2 140 160

3 140 160

4 140

What is the payback period of each project?(Round your answers to 1 decimal place.)

(v)

A project that costs $3,300 to install will provide annual cash flows of $950 for each of the next 6 years.

a.What is NPV if the discount rate is 13%?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

b.How high can the discount rate be before you would reject the project?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

(vi)

A new computer system will require an initial outlay of $23,500, but it will increase the firm's cash flows by $5,000 a year for each of the next 7 years.

a.Calculate the NPV and decide if the system is worth installing if the required rate of return is10%.(Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

NPV:

Worth Installing:

(vii)

Here are the cash flows for a project under consideration:

C₀ C₁ C₂

$8,210 +$6,220 +$20,400

a.Calculate the project's net present value for discount rates of 0, 50%, and 100%.(Round your answers to the nearest whole dollar.)

0%

50%

100%

b.What is the IRR of the project?(Do not round intermediate calculations. Enter your answer as a whole percent.)

(viii)

If you insulate your office for $20,000, you will save $2,000 a year in heating expenses. These savings will last forever.

a.What is the NPV of the investment when the cost of capital is 8%? 10%?

b.What is the IRR of the investment?(Enter your answer as a whole percent.)

c.What is the payback period on this investment?

(viiii)

A project has a life of 7.0 years and a payback period of 7.0 years. Is the project NPV positive or negative?

Positive

Negative