1. A project will produce an operating cash flow of $1,704,000 a year for three years. The initial cash outlay for equipment will be $2,850,000. The net aftertax salvage value of $350,000 will be received at the end of the project. The project requires $109,000 of net working capital that will be fully recovered. What is the net present value of the project if the required rate of return is 12 percent?
$1,347,222
$1,275,649
$1,517,410
$1,460,428
$1,580,206
2. Assume a machine costs $780,000 and lasts five years before it is replaced. The operating cost is $86,200 a year. Ignore taxes. What is the equivalent annual cost if the required rate of return is 12 percent? (Hint: the EAC should account for both initial investment and annual operating costs)
$318,875.58
$252,400.62
$280,830.66
$279,310.27
$302,579.59