1. Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $7.1 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. The land would net $9.9 million if it were sold today. The company now wants to build its new manufacturing plant on this land; the plant will cost $21.1 million to build, and the site requires $860,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?(Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
2. H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,430,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,260,000 in annual sales, with costs of $1,250,000. If the tax rate is 40 percent, what is the OCF for this project?(Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
3. Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy's paid $126,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $581,000 per year. The fixed costs associated with this will be $185,000 per year, and variable costs will amount to 21 percent of sales. The equipment necessary for production of the Potato Pet will cost $632,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy's has a tax rate of 30 percent and a required return of 15 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) -Calculate the payback period for this project.- Calculate the NPV for this project. -Calculate the IRR for this project.
4. CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $499,000 is estimated to result in $198,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Table), and it will have a salvage value at the end of the project of $62,000. The press also requires an initial investment in spare parts inventory of $22,400, along with an additional $4,400 in inventory for each succeeding year of the project. The shop's tax rate is 40 percent and its discount rate is 11 percent. Calculate the NPV.(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
5. Aria Acoustics, Inc., (AAI) projects unit sales for a new seven-octave voice emulation implant as follows:

Year Unit Sales

1 112,000

2 131,000

3 119,000

4 102,000

5 88,000

Production of the implants will require $1,580,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $1,430,000 per year, variable production costs are $233 per unit, and the units are priced at $353 each. The equipment needed to begin production has an installed cost of $27,000,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS (MACRS Table) property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. AAI is in the 35 percent marginal tax bracket and has a required return on all its projects of 18 percent.

What is the NPV of the project?

What is the IRR of the project?