Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs by $110,000 annually. Madison would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $33,000 at the end of its 5-year operating life. The applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. Working capital would increase by $35,000 initially, but it would be recovered at the end of the project's 5-year life. Madison's marginal tax rate is 40%, and a 9% cost of capital is appropriate for the project.

1. Calculatetheproject'sNPV.Roundyouranswertothenearestdollar.$
2. Calculatetheproject'sIRR.Roundyouranswertotwodecimalplaces%
3. Calculatetheproject'sMIRR.Roundyouranswertotwodecimalplaces%
4. Calculatetheproject'spayback.Roundyouranswertotwodecimalplaces
5. Assumemanagementisunsureaboutthe$110,000costsavings-thisfigurecoulddeviatebyasmuchasplusorminus20%.
6. CalculatetheNPVifcostsavingsvaluedeviatebyplus20%.Roundyouranswertothenearestdollar.$
7. CalculatetheNPVifcostsavingsvaluedeviatebyminus20%.Roundyouranswertothenearestdollar.$
8. SupposetheCFOwantsyoutodoascenarioanalysiswithdifferentvaluesforthecostsavings,themachine'ssalvagevalue,andtheworkingcapital(WC)requirement.Sheasksyoutousethefollowingprobabilitiesandvaluesinthescenarioanalysis:

   Scenario	Probability	Cost Savings	Salvage Value	WC
   Worstcase	0.30	$88,000	$28,000	$40,000
   Basecase	0.40	110,000	33,000	35,000
   Bestcase	0.30	132,000	38,000	30,000

   Calculatetheproject'sexpectedNPV.Roundyouranswertothenearestdollar.$
9. Calculatetheproject'sstandarddeviation.Roundyouranswertothenearestdollar.$
10. Calculatetheproject'scoefficientofvariation.Roundyouranswertotwodecimalplaces