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Problems 1 through 4 refer to the following information: YEAR Project A 0 ($29,000) 1 $22,000 2 $18,000 3 $9,000 4 ($2,000) 5 $9,000 1.

Problems 1 through 4 refer to the following information:
YEAR Project A
0 ($29,000)
1 $22,000
2 $18,000
3 $9,000
4 ($2,000)
5 $9,000
1. Calculate discounted payback for this project assuming an interest rate of 10%.
2. Calculate the equivalent annual annuity (EAA) of this project assuming an interest rate of 10%.
3. Calculate the modified internal rate of return (MIRR) of this project assuming an interest rate of 10%.
4. Company X expects to sell 10,000 units of a new project at an average price of $12 each for each of the next four years. Costs-of-goods sold (variable costs) are expected to be 40% of sales in the first year, 45% of sales in the second and third years, and then 50% for the fourth year. Fixed costs will be $15,000 per year. The machine required to make the new products will cost $100,000 to buy and will be depreciated using the MACRS 3-year class (0.3333; 0.4445; 0.1481; 0.0741). The machine will be sold at the end of the fourth year for $40,000. The tax rate is 40%. Working capital requirements are $20,000. The companys cost of capital is 10%. What is the net present value (NPV) of this project?

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