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Ch 9-1    The expected cash flows for a project are as follows. The required return is 12 percent.

Calculate the Internal Rate of Return and state whether the project should be accepted or rejected.

 year cash flow 0 (32,000) 1 14,000 2 15,750 3 11,250

The expected cash flows for a project are shown below.

Ch 9-2 a     Calculate the NPV with a 14% required rate of return and state whether the project should be accepted or rejected.

Ch 9-2 b     Calculate the NPV with a 20% required rate of return and state whether the project should be accepted or rejected.

 year cash flow 0 (38,500) 1 16,750 2 20,250 3 17,500

Ch 10-1  Calculating Projected Net Income [LO1] A proposed new investment has projected sales of \$740,000. Variable costs are 46 percent of sales, and fixed costs are \$225,000; depreciation is \$78,000.

Ch 10-1 Prepare a proforma income statement assuming a tax rate of 32 percent. What is the projected net income?

Project Evaluation [LO1] A company is looking at a new production system with an installed cost of \$725,000. This cost will be depreciated in equal installments over the project’s five-year life, at the end of which the system will retain a salvage value of \$125,000. The system will save the firm \$275,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of \$38,000.

Ch 10-2                 If the tax rate is 36 percent and the discount rate is 12 percent, what is the NPV of this project?

Calculating Break-Even [LO3] In each of the following cases:

Calculate the accounting break-even and the cash break-even points. Ignore any tax effects in calculating the cash break-even.

Ch 11-1a               Ch 11-2 a     Ch 11-3 a

 unit price variable cost per unit fixed cost annual depreciation 2,200 1,850 6,000,000 2,200,000 50 42 150,000 145,000 275 210 16,250 18,750

Using Break-Even Analysis [LO3] Consider a project with the following data: accounting break-even quantity = 15,400 units; cash break-even quantity = 12,200 units; project life = 6 years; fixed costs = \$220,000; variable costs = \$34 per unit; required return = 10 percent. Ignore the effect of taxes.

Ch 11-2                 Find the financial break-even quantity.

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