Question 1 (evaluating investment projects) Generic Motors Corporation is planning to invest $150,000 in year zero (today) in new equipment. This investment is expected to generate net cash flows of $60,000 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 simple rate of return (SRR) for this project? To compute SRR, first compute: annual depreciation $ annual income s investment-$ SRR % (enter say 10% as 10, not as 0.1 and not as 10 %) Question 2 (evaluating investment projects) General Motors (or Toyota) is thin king of investing in new production equipment, which will cost $150 million in year zero, and will generate cost savings of $90 million in year 1, $60 million in year 2, and $45 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? 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 NPV 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)