3. 4. I be preferred over the other. OBJECTIVE 1 3 How much did the company in Scenario c invest in the project? What is the average net income earned by th by the project in Scenario d? Exercise 14-28 Net Present Value ILLUSTRATING flows. Each of the following scenarios is independent. Assume that all cash flows are after-tax cash a. Southward Manufacturing is considering the purchase of a new welding system. The cash b . benefits will be $400,000 per year. Th r. The system costs $2,250,000 and will last 10 years. Kaylin Day is interested in inv in investing in a women's specialty shop. The cost of the investment is $180,000. She estimates that the return from owning her own shop will be $35,000 per C. year. She estimates that the shop will have a useful life of 6 years. Goates Company calculated the NPV of a project and found it to be $21,300. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $45,000. Required: 1. Compute the NPV for Southward Manufacturing, assuming a discount rate of 12%. Should the company buy the new welding system? SVITDALSO 2. CONCEPTUAL CONNECTION Assuming a required rate of return of 8%, calculate the NPV for Kaylin Day's investment. Should she invest? What if the estimated return was $45,000 per year? Would this affect the decision? What does this tell you about your analysis? 3. What was the required investment for Goates Company's project? OBJECTIVE 1 4 Exercise 14-29 Internal Rate of Return Each of the following scenarios is independent. Assume that all cash flows are after-tax flows. ILLUSTRATING RELATIONSHIPS a. Cuenca Company is considering the purchase of new equipment that will speed up the p for producing flash drives. The equipment will cost $7,200,000 and have a life of 5 yea no expected salvage value. The expected cash flows associated with the project follow: Year Cash Revenues Cash Expenses $8,000,000 $6,000,000 8,000,000 6,000,000 8 000,000 6,000,000