You must show equations, all calculator inputs, and outcomes to receive full or partial credit. 1. A company buys $1 million in equipment for a new project. When they are done with the equipment, they will be able to salvage it for $100,000. The project needs $30,000 in additional inventories and $40,000 in additional accounts payable. The company tax rate is 20%. What is the initial investment of the project? 2. You have been given the following information for a project you are evaluating. Equipment costs are expected to be $2,000,000. Unit sales are expected to be 50,000 per year. Price is expected to be $12 per unit and variable costs are $6 per unit. Fixed costs are expected to be $100,000 per year. Depreciation will use MACRS factors (.33, .45, .15, .07). Tax rate is 20%. Calculate the year 3 operating cash flow. 3. A project you are evaluating involves buying a machine that costs $600,000. You will be able to sell for $80,000 when you are done with it. Your tax rate is 20%. The project required working capital that you will release when you are done with the project, including $100,000 in inventory and $60,000 in additional accounts payable. What is your terminal cash flow? 4. A company has been presented with the following investment opportunity: The investment outlay is expected to be $600,000 in Year O. After that, the project is expected to earn end-of-year after-tax operating cash flows of $100,000 in Year 1, $150,000 in Year 2, $250,000 in Year 3 and $300,000 in Year 4. If your WACC is 9%, what is the NPV and IRR for the project? What happens if the WACC is 11%? 5. Your company is deciding between 2 different projects. The firm's cost of capital is 8% Project A: The initial investment is $1,000,000. The project will last for 4 years and the cash flows are expected to be $320,000 per year. Project B: The initial investment is $1,200,000. The project will last for 4 years and the cash flows are expected to be $375,000 per year. Calculate the NPV for both projects. What is your decision is the projects are mutually exclusive? What is your decision of the projects are independent?