Roger and Serena, tennis consultants want to purchase a new tennis ball machine. The machine would record clients hitting tennis balls and measure the speed of their strokes, spins, etc. Roger and Serena would then advise clients regarding steps to improve. They have procured three bids for a new system. But as their skills relate more to forehands, they are confused about which to accept. They have hired the USF Managerial Accounting class to look at the proposals and make a recommendation to them. They think all the systems would have a useful life of 5 years.

	Proposal A	Proposal B	Proposal C
Initial investment in equipment	$600,000	$750,000	$450,000
Working capital needs, returned at end of project life	5,000	1,000	7,000
Annual maintenance costs	10,000	11,000(a)	20,000
Salvage value at end of year 5	10,000	45,000	0
Consulting hours per year	400	500	320

Annual maintenance costs for Proposal B escalate 20% per year due to complexity of system.

Roger and Serena can bill consulting hours at $400 per hour. This represents their revenues.

REQUIRED:

1. Compute the net present value and IRR of each proposal with a discount rate of 8%.

2. Compute the payback of each.

3. Which project would you recommend and why? This is your conclusion. The conclusion should be included on the Input tab.

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(Please also explain how to get revenues and total cash flows)