2. This is a 5 part question, a-e.

a) Vicknair Health Systems has estimated the following cash flows of dollars for a 3-year capital project with a cost of capital of 10%:

Year 0	$(100,000)
Year 1	60,000
Year 2	40,000
Year 3	30,000

The projects payback period rounded to the nearest whole year is __________

b) Vicknair Health Systems has estimated the following cash flows of dollars for a 3-year capital project with a cost of capital of 10%:

Year 0	$(100,000)
Year 1	60,000
Year 2	40,000
Year 3	30,000

What is the projects net present value (NPV) rounded to the nearest whole dollar $ __________

c) With the information provided in (b), the project's internal rate of return (IRR) as a decimal rounded to the nearest .001 is __________

d) Now consider that Vicknair Health Systems has a project with the following cash flows:

Year 0	$(160,000)
Year 1	1,000,000
Year 2	(1,000,000)

The projects internal rate of return (IRR) in decimal form rounded to the nearest .001 is __________

- .25

- Cannot be determined from the information

- Both 0.250 and 4.000

- 4.0

e) Vicknair company is considering 2 machines, A and B. Both have the same initial cost, 5-year economic life and will generate the same annual revenues. In addition, each project has a positive net present value. However, their operating cash flows differ:

	Operating Cash Outflows
	Project A	Project B
End year 1	$ (1,000)	$ (1,000)
End year 2	(1,000)	(500)
End year 3	(1,000)	(500)
End year 4	(1,000)	(1,500)
End year 5	(1,000)	(1,500)

Based solely on net present value analysis (ignore IRR) and assuming a 10% cost of capital, which of the following is the best answer?

• Group of answer choices
• Project B should be selected.
• Neither project should be selected
• Cannot be determined from the information
• Project A should be selected.