Need Help with 3 Managerial accounting problems NVP , ARR and IRR Problems

Generic Motors Corporation is planning to invest $250,000 in year zero (today) in new equipment. This investment is expected to generate net cash flows of $100,000 a year for the next 4 years (years 1-4). The salvage value after 4 years is zero. The discount rate (cost of capital) is 20% a year. Required: a) What is the net present value (NPV) of this project? NPV = $ Should the firm invest, based on NPV? (1=yes, 2=no) b) What is the payback period for this project? payback period = years c) What is the modified payback period for this project? between 1 and 2 years between 2 and 3 years between 3 and 4 years d) What is the accounting rate of return (ARR) for this project? To compute ARR, first compute: annual depreciation=$ annual income=$ average investment=$ ARR = % (enter say 10% as 10, not as 0.1 and not as 10%) Question 2 (evaluating investment projects) General Motors (or Toyota) is thinking of investing in new production equipment, which will cost $400 million in year zero, and will generate cost savings of $240 million in year 1, $160 million in year 2, and $120 million in year 3. After 3 years, the salvage value is zero. The cost of capital (discount rate) is 25% for General Motors and 10% for Toyota. (Due to GM's recent bankruptcy, investors are scared to lend it money, so GM has to pay much higher interest rates to attract capital). Required: a) What's the NPV of this project for General Motors? NPV = $ million (If you get say $3.52 million, enter 3.52 not 3,520,000. If you get a negative number, enter it with a minus sign, i.e., -3.52 not (3.52)) Should GM invest, based on NPV? (1=yes, 2=no) b) What's the NPV of this project for Toyota? NPV = $ million Should Toyota invest, based on NPV? (1=yes, 2=no) c) If you computed (a) and (b) correctly, the decisions for GM and Toyota should be different. Briefly explain why they are different. This answer has not been graded yet. Subm Answer it Save Progress Practice Another Version Question 3 When we evaluate investment projects, a) do we prefer higher or lower NPV? (1=higher, 2=lower) b) do we prefer higher or lower IRR? (1=higher, 2=lower) c) do we prefer higher or lower payback period? (1=higher, 2=lower) d) do we prefer higher or lower modified payback period? (1=higher, 2=lower) e) do we prefer higher or lower ARR? (1=higher, 2=lower)