a. Given the following cash flows for two mutually exclusive projects (A and B), which project should be chosen? Assume that the required rate of return of both projects is 10%. (Hint: Use EAC.) b. A firm is considering the purchase of equipment which will cost $1 million. This equipment will last for seven years, at the end of which it can be sold for $100,000. The CCA rate for this asset class is 30%, and the firm expects to have other assets in this asset class at the end of year 7. This equipment is expected to increase before-tax operating cash flows by $303,030 per year. However, in order to put the equipment to use, an additional $150,000 will need to be invested in net working capital initially (i.e., at t=0). The required rate of return is 15% and the firms marginal tax rate is 34%. Should the firm purchase this equipment? c. Suppose that to arrive at the before-tax operating cash flows in part (b), we have used the following estimates: Fixed costs = $96,970 Variable costs = 60% of sales What is the Net Present Value of the new equipment if, in the best-case scenario, we estimate that fixed costs could be lower by 10% and sales revenues could be higher by 30%? d. Given the information in (b), and assuming that fixed costs are $96,970 and variables costs are 60% of sales, what is the sales level at which Net Present Value equals zero? (I.e., what is the financial break-even sales level?)