Q1) The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,010,000, and it would cost another $22,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $599,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $19,000. The sprayer would not change revenues, but it is expected to save the firm $360,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. a. What is the Year-0 net cash flow? $ b. What are the net operating cash flows in Years 1, 2, and 3?

Year 1: $............

Year 2: $............

Year 3: $............

c. What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital)?

$..........

d. If the project's cost of capital is 10%, what is the NPV of the project? $............

Should the machine be purchased? ..........

Q2) The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service:

Projected sales $20 million

Operating costs (not including depreciation) $9 million

Depreciation $5 million

Interest expense $3 million

The company faces a 25% tax rate. What is the project's operating cash flow for the first year (t = 1)? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000.

Round your answer to the nearest dollar. $...........

Q3) Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,500 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $8,000 per year for 5 years. Calculate the two projects' NPVs, assuming a cost of capital of 14%. Do not round intermediate calculations. Round your answers to the nearest cent.

Project S:

$ Project L: $

Which project would be selected, assuming they are mutually exclusive?

Based on the NPV values, would be selected.

Calculate the two projects' IRRs. Do not round intermediate calculations. Round your answers to two decimal places.

Project S: %

Project L: %

Which project would be selected, assuming they are mutually exclusive?

Based on the IRR values would be selected.

Calculate the two projects' MIRRs, assuming a cost of capital of 14%. Do not round intermediate calculations. Round your answers to two decimal places.

Project S: %

Project L: %

Which project would be selected, assuming they are mutually exclusive?

Based on the MIRR values, would be selected.

Calculate the two projects' PIs, assuming a cost of capital of 14%. Do not round intermediate calculations. Round your answers to three decimal places.

Project S:

Project L:

Which project would be selected, assuming they are mutually exclusive?

Based on the PI values would be selected.

Which project should actually be selected?

........ should actually be selected.

Q4) A project has an initial cost of $45,000, expected net cash inflows of $10,000 per year for 8 years, and a cost of capital of 14%. What is the project's NPV? (Hint: Begin by constructing a timeline.) Do not round intermediate calculations. Round your answer to the nearest cent. $............