1. Desai Industries is analyzing an average-risk project, and the following data have been developed. Unit sales will be constant, but the sales price should increase with inflation. Fixed costs will also be constant, but variable costs should rise with inflation. The project should last for 3 years, it will be depreciated on a straight-line basis, and there will be no salvage value. No change in net operating working capital would be required. This is just one of many projects for the firm, so any losses on this project can be used to offset gains on other firm projects. What is the project's expected NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC Net investment cost (depreciable basis) Units sold Average price per unit. Year 1 Fixed op. cost excl. depr. (constant) Variable op. cost/unit, Year 1 Annual depreciation rate Expected inflation rate per year Tax rate 10.0% $200,000 40,000 $25.00 $150,000 $20.20 33.333% 5.00% 40.0% a. -$48.202 b. -$44.185 C. -$51,645 d. -$68.860 e. -$57,383 2. Nast Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher MIRR rather than the one with the higher NPV, how much value will be forgone? Note that under some conditions choosing projects on the basis of the MIRR will cause $0.00 value to be lost. 1 $375 $725 2. $375 $725 3 $375 $725 4 $375 $725 WACC: 8.00% 0 CFS -$1,100 CFL -$2.200 a. $50.95 b. $66.95 C. $59.24 d. $47.40 e. $72.28