Best Co. is evaluating a project that will increase annual sales by $100,000 per year and incremental cash costs by $60,000 per year. The project will require an investment of $125,000 in fixed assets, which can be depreciated on a straight-line to a zero book-value over the 5-year life of the project. The applicable tax rate is 25%. The company expects the fixed asset can be sold at the end of the project (year 5) for $7,500 salvage value.

What is the operating cash flow (OCF) for this project?

Group of answer choices

OCF 30,000

30,000 < OCF 40,000

40,000 < OCF 50,000

50,000 < OCF

Best Co. is evaluating a project that will increase annual sales by $100,000 per year and incremental cash costs by $60,000 per year. The project will require an investment of $125,000 in fixed assets, which can be depreciated on a straight-line to a zero book-value over the 5-year life of the project. The applicable tax rate is 25%. The company expects the fixed asset can be sold at the end of the project (year 5) for $7,500 salvage value.

What is the IRR of the project?

Group of answer choices

IRR 5.0%

5.0% < IRR 10.0%

10.0% < IRR 20.0%

20.0% < IRR

Best Co. is evaluating the following mutually exclusive projects for investment (numbers are in $ millions).

Period	Proj. A	Proj. B	Proj. C
0	-10	-15	-20
1	3	3	4
2	3	4	5
3	3	5	6
4	3	6	7
5	3	7	8

Based on the IRR rule, if the hurdle rate is 15% and the projects are mutually exclusive, which project(s) should Best Co. accept?

Group of answer choices

Project A

Project B

Project C

None of the projects