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Kingston, Inc. management is considering purchasing a new machine at a cost of $3,847,361. They expect this equipment to produce cash flows of $889,402, $913,431, $887,951, $1,103,872, $1,261,357, and $1,298,868 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment? (Enter negative amounts using negative sign e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25.)

The NPV is $

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Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $2,056,046. have a life of five years, and would produce the cash flows shown in the following table.

Year	Cash Flow
1	$444,847
2	-251,566
3	710,132
4	865,222
5	843,412

What is the NPV if the discount rate is 15.07 percent?  (Enter negative amounts using negative sign e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25.)

NPV is

$

Problem 10.26

Compute the IRR on the following cash flow streams: a. An initial investment of $23,018 followed by a single cash flow of $33,097 in year 6.  (Round intermediate calculations to 4 decimal places, e.g. 1.2512 and final answer to 2 decimal places, e.g. 15.25%.)

IRR

%

b. An initial investment of $1,161,091 followed by a single cash flow of $1,732,953 in year 4.  (Round intermediate calculations to 4 decimal places, e.g. 1.2512 and final answer to 2 decimal places, e.g. 15.25%.)

IRR

%

c. An initial investment of $2,420,218 followed by cash flows of $2,046,925 and $1,434,250 in years 2 and 4, respectively.  (Round answer to 2 decimal places, e.g. 15.25%.)

IRR

%

Problem 10.6

Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 7 percent discount rate for their production systems.

Year		System 1		System 2
0			-$13,100			-$42,300
1			13,100			30,900
2			13,100			30,900
3			13,100			30,900

What are the payback periods for production systems 1 and 2?  (Round answers to 2 decimal places, e.g. 15.25.)

Payback period of System 1 is  years and Payback period of System 2 is  years

If the systems are mutually exclusive and the firm always chooses projects with the lowest payback period, in which system should the firm invest?

The firm should invest in .

Problem 10.17

Creative Solutions, Inc., has just invested $5,472,361 on equipment. The firm uses payback period criteria of not accepting any project that takes more than four years to recover its costs. The company anticipates cash flows of $521,437, $851,975, $1,174,854, $1,454,131, $3,186,392, and $2,437,008 over the next six years. (Round answer to 2 decimal places, e.g. 15.25.)

What is the payback period of this investment?

Payback period is  years.

Should Creative Solutions, Inc. go ahead with this project?

The firm should  the project.

Problem 10.32

Jekyll & Hyde Corp. is evaluating two mutually exclusive projects. The cost of capital is 15 percent. Costs and cash flows are given in the following table.

Year		Project 1		Project 2
0		-$1,246,734		-$1,106,742
1		262,975		319,900
2		319,165		319,900
3		462,330		319,900
4		462,200		319,900
5		798,975		319,900

Calculate NPV and IRR of two projects.  (Enter negative amounts using negative sign, e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25 or 12.25%.)

NPV of project 1 is	$
NPV of project 2 is	$
IRR of project 1 is			%
IRR of project 2 is			%

Which project should be accepted?

Jekyll and Hyde Corp. should accept

Problem 10.10

Capitol Corp. management is expecting a project to generate after-tax income of $65,027 in each of the next three years. The average book value of the project’s equipment over that period will be $258,596. If the firm’s acceptance decision on any project is based on an ARR of 37.5 percent.  (Round answer to 2 decimal places, e.g. 5.25%.)

What is the project’s accounting rate of return?

Accounting rate of return is

%

Should the firm accept this project?

The firm should  the project.

Problem 10.22

Sycamore Home Furnishings is considering acquiring a new machine that can create customized window treatments. The equipment will cost $282,001 and will generate cash flows of $64,256 over each of the next six years. If the cost of capital is 14.59 percent, what is the MIRR on this project?  (Round answer to 2 decimal places, e.g. 15.25%.)

MIRR

%

roblem 10.39

Tyler, Inc., is considering switching to a new production technology. The cost of the required equipment will be $4,130,199 . The discount rate is 10.05 percent. The cash flows that the firm expects the new technology to generate are as follows.

Years		CF
0		$(4,130,199)
1–2		0
3–5		$919,056
6–9		$1,464,380

a. Compute the payback and discounted payback periods for the project.  (Round answers to 2 decimal places, e.g. 15.25.)

The payback for the project is  years, and the discounted payback period is  years.

b. What is the NPV for the project? Should the firm go ahead with the project?  (Round answer to 2 decimal places, e.g. 15.25.)

The NPV of the project is $, and using the NPV rule the project should be .

c. What is the IRR, and what would be the decision based on the IRR?  (Round answer to 2 decimal places, e.g. 15.25.)

The IRR of the project is %, and using the IRR rule the project should be .