Chapter 10: 8. Mills Corp. is considering two mutually exclusive machines. Machine A requires an up-front expenditure at t=0 of $450,000, has an expected life of two years, and will generate positive after-tax cash flows of $350,000 per year (all cash flows are realized at the end of the year) for two years. At the end of two years, the machine will have zero salvage value, but every two years the company can purchase a replacement machine with the same cost and cash inflows. Alternatively, it can choose Machine B, which requires an expenditure of $1 million at t=0, has an expected life of four years, and will generate positive after-tax cash flows of $350,000 per year (all cash flows are realized at year end). At the end of four years, Machine B will have an after-tax salvage value of $100,000. The cost of capital is 10%. Calculate the equivalent annual annuity (EAA) for both machines and identify the most profitable machine. 9. a) Singh Inc. is considering a project that has the following cash flows: The company's WACC is 10%. What are the project's payback, IRR, and NPV? b) Explain the financial life cycle of a capital asset such as an oil refinery. Why does project management focus on the three critical metrics of scope, time and cost ("the triple imperative")? 10. See-more Associates is considering two mutually exclusive projects that have the following cash flows: At what cost of capital do the two projects have the same NPV? (That is, what is the crossover rate?)