Williams Corp is a manufacturer that is considering adding a new product line - either tillers for tractors (Proposal A) or trailers for trucks (Proposal B). To do so, it will need to invest in new equipment. Williams Corp. has gathered the following information about each proposal: Proposal A's equipment will cost $8,740,000 and is expected to result in annual net cash inflows of $1,505,000 over nine years, with zero residual value at the end of nine years. Proposal B's equipment will cost $7,880,000 and is expected to generate net cash inflows of $985,000 per year for nine years. Estimated residual value for Plan B is $1,075,000. Williams Corp. uses straight-line depreciation and requires an annual rate of return of 6%. Note: At a 6% discount rate, the present value of annuity of $1 for 9 years is 6.802, and the present value of $1 for 9 years is 0.592.

Answer the following questions. Each question is worth 1 point.

1. Compute depreciation expense per year for Proposal A (using straight-line depreciation): Incorrect. Tries 4/10 Previous Tries

2. Compute payback period for Proposal A (round answer to one decimal place): 5.8 You are correct.

3. Compute accounting rate of return for Proposal B (calculate answer to three decimal places; for example, enter 11.8% as 0.118): Tries 0/10

4. Compute net present value (NPV) for Proposal B. Enter as a positive number if NPV is positive, otherwise as a negative. (round answer to the nearest dollar): Tries 0/10

5. What is the internal rate of return (IRR) for Proposal A? Enter as a percentage not decimal; e.g., 8.12 not .0812. (Hint: Use an excel formula)