You will calculate investment returns using various ROI methods and appraise a specified new investment to determine its profitability.

Problem $1$: A project has an initial cost of $$40,000,$ expected net cash inflows of $$9,000$ per year for $7$ years, and a cost of capital of $11\%.$

REQUIRED: What is the project$$s NPV$?($Hint: Begin by constructing a timeline. What is the project$$s payback period?

Problem $2$: Your division is considering two investment projects, each of which requires an up$-$front expenditure of $$15$ million. You estimate that the investments will produce the following net cash flows: $($See attached ph$0$to$)$::

REQUIRED: What are the two projects$$ net present values, assuming the cost of capital is $5\%?$ What are the two projects$$ net present values, assuming the cost of capital is $10\%?$ What are the two projects$$ net present values, assuming the cost of capital is $15\%?$

Problem $3$: Davis Industries must choose between a gas$-$powered and an electric$-$powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. $($They are mutually exclusive investments.$)$ The electric$-$powered truck will cost more, but it will be less expensive to operate; it will cost $$22,000,$ whereas the gas$-$powered truck will cost $$17,500.$ The cost of capital that applies to both investments is $12\%.$ The life for both types of truck is estimated to be $6$ years, during which time the net cash flows for the electric$-$powered truck will be $$6,290$ per year, and those for the gas$-$powered truck will be $$5,000$ per year. Annual net cash flows include depreciation expenses.

R$3$QUIRED: Calculate the NPV for each type of truck and decide which to recommend.