$($Assignment Instructions$)$:

Please do problem $3$ on page $409$ and problem $5$ on page $410$ & $411$ with the following modifications. See Link to Chapter $12$ Problems.

Problem $3$

$1.$ Replace the MACRS depreciation with straight line depreciation.

$2.$ For part a$,$ just do NPV$,$ IRR and MIRR.

$3.$ Skip part b$.$

Problem $5$

$1.$ Just do part a$.$

$($I need to submit this via xlxs using Excel workbook so please make sure to show that with formulas you used.$)$

$3.$ Arroy Snackfoods is considering replacing a five$-$year$-$old machine that originally cost $$75,000.$ It was being depreciated using straight$-$line to an expected salvage value of zero over its original $10-$year life, and could now be sold for $$40,000.$ The replacement machine would cost $$215,000$ and have a five$-$year expected life. It would be depreciated using the MACRS $5-$year class life. The expected salvage value of this machine after $5$ years is $$30,000.$ The new machine is expected to operate much more efficiently, saving $$6,000$ per year in energy costs. In addition, it will eliminate one salaried position saving another $$68,000$ annually. The firm's marginal tax rate is $25\%$ and the WACC is $9\mathrm{.}5\%.$

$$Set up an operating cash flow statement, and calculate the payback, discounted payback, NPV$,$ IRR, and MIRR of the replacement project.

Should the project be accepted?

$$At what discount rate would you be indifferent between keeping the existing equipment and purchasing the new equipment?

$5.$ The Chief Financial Officer of Eaton Medical Devices has determined that the firm's capital investment budget will be $$5,000,000$ for the upcoming year.

Unfortunately, this amount is not sufficient to cover all of the positive NPV projects available to the firm.

Project Cost NPV

A $$1,061,191$ $$122,737$

B $561,75858,102$

C $1,647,849280,660$

D $1,026,02089,365$

E $191,87017,568$

F $1,333,62576,960$

G $3,102,642123,240$

H $275,56879,367$

I $2,044,07060,506$

J $1,017,56756,690$

You have been asked to choose which investments should be made.

a$.$ Using the Solver, determine which of the above projects should be included in the budget if the firm's goal is to maximize shareholder wealth. $($Note: Set the Solver to use the Simplex LP method, and turn off the Ignore Integer Constraints setting.$)$