Two mutually exciusive investment opportunities require an initial investment of $5 million. Investment A then generates $1.5 million per year in perpetuity, while investment B pays $1 million in the first year, with cash flows increasing by 3% per year after that. At a discount rate of 9, both projects will have the same NPV. Which project would you prefer if the discount rate was 8% ? NPV of A wall be the same as NPV of B at 8 Insuathelent information to determine Preler Proiect 8 because the NPV of 8 will be greater than NPV of A at a discount rate of 8X Mefer Prolect A because the NPY of A will be weater than NPV of 8 at in tiscoint rate of fox Question 2 1 pts Mr Xi has been offered an upfront payment today of $14 million to star in the lead role in three movies over the next 3 years. If Mr XI takes this offer, he will have to forgo acting in other movies that would pay him 55 million at the end of each of the next three years. Assume Mr Xirs personal cost of capital is 10 \& per year. The NPV of the three-movie offer is closest to: $1.0 million Tit or mitition $1.0 miltion cos mintion You decide to use a currently unused warehouse building for a new project. The warehouse building is already fully paid for, and you don't have any costs or income associated with it. If you didn't use the warehouse for this project you could sell it. The use of this warehouse for the new project is included in your DCF model as an: cambalization It is not included as there are no costs associated with it m apportunity cost an overhead Question 8 1 pts Incremental cash flows are: Cash flows that occur imesularty Cash fows that switch between positive and negabre canh floms Company ABC is a clothing manufacturer and is considering buying a new manufacturing machine to produce a new line of disposable hospital gowns. The machine has an estimated life of 3 years and costs $30,000. The machine falls under asset class 43 and has a capital cost allowance (CCA) rate of 30%. At the end of 3 years the machine will be scrapped as it will have a zero value. The tax rate for company ABC is 35%. ABC has a cost of capital of 10%. The Present Value of the CCA Tax Shield is: $7,875 $3,150 $7.517 $30,000