You are considering two mutually exclusive investments. The projects expected net cash flows are as follows:

Expected Net Cash Flows

Year	Project X	Project Z
0	$(45,000)	$(50,000)
1	(20,000)	15,000
2	11,000	15,000
3	20,000	15,000
4	30,000	15,000
5	45,000	15,000

1. Construct NPV profiles for Projects X and Z (table AND line graph).

2. Calculate each projects IRR.

3. If the required rate of return for each project is 9 percent, which project should you select? If the required rate of return is 12 percent, what would be the proper choice? If the required rate of return is 15 percent, what would be the proper choice?

4. At what rate do the NPV profiles of the two projects cross?

2. Please see the income statement below - calculate:

   1. Degree of operating leverage

   2. Degree of financial leverage

   3. Degree of total leverage

Sales	$150,000
Variable Operating Costs	(105,000)
Gross Profit	45,000
Fixed Operating Costs	(20,000)
Net Operating Income	25,000
Interest	(15,000)
Earnings before Taxes	10,000
Taxes (40%)	(4,000)
Net Income	$6,000

3. Given the information below, which of the following firms would be considered riskiest? Explain your answer.

Company	DOL	DFL
Alps	1.5x	6.0x
Apex	3.0x	4.0x
Acme	5.0x	2.0x

4. Assume that Wonka Industries has a $500,000 capital budget planned for the coming year and its net income is forecasted at $850,000. Wonka Industries has 300,000 shares outstanding. Determine the DPS the Wonka Industries will pay for the coming year if they apply the following policies:

   1. Residual dividend policy

   2. Stable, predictable dividend policy and they paid a dividend of $1 per share last year

   3. Constant payout ratio of 55%

   4. Low regular dividend of $0.75 plus 40% of earnings greater than $750,000

a) Construct NPV profiles for Projects X and Z (complete the following ta Discount Rate NPV X Profile NPV Z Profile Calculate each project's IRR Project X IRR Project Z IRR 2) Which project would you choose for the following rates? d) At what rate do the NPV profiles of the two projects cross? Year Difference in cash flows: a) Construct NPV profiles for Projects X and Z (complete the following ta Discount Rate NPV X Profile NPV Z Profile Calculate each project's IRR Project X IRR Project Z IRR 2) Which project would you choose for the following rates? d) At what rate do the NPV profiles of the two projects cross? Year Difference in cash flows