o dioud Hard copy to be submitted on Canvas (I do NOT need copies of the questions, only your answers). You must show your work for credit. Answers that aren't your own will receive a zero. Unless otherwise noted, ignore taxes and transaction costs. 1. Explain the difference between independent, mutually exclusive, and contingent investment projects. Imagine that you work for Ford, the car manufacturer. Give examples of each type of project that they might be considering. [Note: you don't have to do any research about Ford to answer this question. Just think of potential projects that a company like Ford might consider which would fit in each category, to show me that you understand the difference between the three types.] 2. Depreciation is a noncash expense. Despite that fact, explain why it is necessary to consider depreciation when estimating a project's net cash flows. 3. Blyft, an app that arranges for people to pick you up on their bicycles, has developed the following schedule of potential investment projects that may be undertaken over the next year: Cost (millions) Project A B . Expected Return 20% 22% 7% 10% D 12% 8% Draw a graph plotting the firm's investment opportunity curve (IOC) and its marginal cost of capital curve (MCC). Be sure to label your graph clearly. Assume that the firm's marginal cost of capital is 8% for the first $10 million of total investments, 9% for the next $10 million, and 10% for any investments in excess of $20 million. Which projects should be adopted? 4. Javanka Industries is considering purchasing a new milling machine from Russia that costs $150,000 The machine's installation and shipping costs will total $10,000. If accepted, the milling machine project 4. Javanka Industries is considering purchasing a new milling machine from Russia that costs $150,000 The machine's installation and shipping costs will total $10,000. If accepted, the milling machine project will require an initial networking capital investment of $30,000 (all working capital will be returned at the end of the project). Javanka plans to fully depreciate the machine on a straight-line basis over a period of eight years (the length of the project). An additional working capital investment of $20,000 will need to be made during year 3. The new milling machine will allow for incremental revenue of $85,000 in year 1, growing 8% (compounded) for the length of the project. This extra revenue will require extra expenses (excluding depreciation) of $40,000 in year 1, growing 5% (compounded) for the length of the Winter 2020 project. The firm's marginal tax rate is 40%. At the end of the project the milling machine will be sold for $60,000. Calculate the net investment and the net after-tax cash flows of the project for each year. 5. Calculate the net present value, the profitability index, the payback period, and the discounted payback period of the Javanka project in question #4. Assume the cost of capital is 12%. Is the IRR higher or lower than 12%? Should the project be completed? 6. Explain the differences between cash flow break even, accounting break even, and financial break even. Which point is associated with the highest volumes? Which point is associated with the lowest? Which break even point is the most important in deciding whether to do a project or not ahead of time (ie, which is the one we should care about the most when making decisions)? o dioud Hard copy to be submitted on Canvas (I do NOT need copies of the questions, only your answers). You must show your work for credit. Answers that aren't your own will receive a zero. Unless otherwise noted, ignore taxes and transaction costs. 1. Explain the difference between independent, mutually exclusive, and contingent investment projects. Imagine that you work for Ford, the car manufacturer. Give examples of each type of project that they might be considering. [Note: you don't have to do any research about Ford to answer this question. Just think of potential projects that a company like Ford might consider which would fit in each category, to show me that you understand the difference between the three types.] 2. Depreciation is a noncash expense. Despite that fact, explain why it is necessary to consider depreciation when estimating a project's net cash flows. 3. Blyft, an app that arranges for people to pick you up on their bicycles, has developed the following schedule of potential investment projects that may be undertaken over the next year: Cost (millions) Project A B . Expected Return 20% 22% 7% 10% D 12% 8% Draw a graph plotting the firm's investment opportunity curve (IOC) and its marginal cost of capital curve (MCC). Be sure to label your graph clearly. Assume that the firm's marginal cost of capital is 8% for the first $10 million of total investments, 9% for the next $10 million, and 10% for any investments in excess of $20 million. Which projects should be adopted? 4. Javanka Industries is considering purchasing a new milling machine from Russia that costs $150,000 The machine's installation and shipping costs will total $10,000. If accepted, the milling machine project 4. Javanka Industries is considering purchasing a new milling machine from Russia that costs $150,000 The machine's installation and shipping costs will total $10,000. If accepted, the milling machine project will require an initial networking capital investment of $30,000 (all working capital will be returned at the end of the project). Javanka plans to fully depreciate the machine on a straight-line basis over a period of eight years (the length of the project). An additional working capital investment of $20,000 will need to be made during year 3. The new milling machine will allow for incremental revenue of $85,000 in year 1, growing 8% (compounded) for the length of the project. This extra revenue will require extra expenses (excluding depreciation) of $40,000 in year 1, growing 5% (compounded) for the length of the Winter 2020 project. The firm's marginal tax rate is 40%. At the end of the project the milling machine will be sold for $60,000. Calculate the net investment and the net after-tax cash flows of the project for each year. 5. Calculate the net present value, the profitability index, the payback period, and the discounted payback period of the Javanka project in question #4. Assume the cost of capital is 12%. Is the IRR higher or lower than 12%? Should the project be completed? 6. Explain the differences between cash flow break even, accounting break even, and financial break even. Which point is associated with the highest volumes? Which point is associated with the lowest? Which break even point is the most important in deciding whether to do a project or not ahead of time (ie, which is the one we should care about the most when making decisions)