1. ProjectAcosts$5,000andwillgenerateannualafter-taxnetcashinflowsof$1,800forfiveyears.WhatistheNPVusing8%asthediscountrate?

(1800 x 3.993) - 5,000 = 7187 - 5000 = $2.187

1. Falkland,Inc.,isconsideringthepurchaseofapatentthathasacostof$50,000andanestimatedrevenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate thefollowingamountsofannualincomeandcashflows:

\fYear 1 Year 2 Year 3 Total Alpha Project $32,000 $22,500 $ 5,000 $59,500 Beta Project 7,500 23,500 28,000 59,000Present Car New Car Purchase cost new $31,000 Transmission and other repairs $ 8,500 Annual cash operating cost 12,500 10,000 Fair market value now 5,000 Fair market value in five years 500 5,000