Consider projects A and B:

	Cash Flows (dollars)
Project	C0	C1	C2	NPV at 10%
A	37,500	27,000	27,000	+	$9,360
B	57,500	40,500	40,500	+	12,789

a.	Calculate IRRs for A and B. project A IRR: _____% Project B IRR: _____%

b.

b. A precision lathe costs $27,000 and will cost $37,000 a year to operate and maintain. If the discount rate is 10% and the lathe will last for 4 years, what is the equivalent annual cost of the tool? (Do not round intermediate calculations. Round your answer to 2 decimal places. Enter your answer as a positive value.)

Equivalent annual cost: $_______

c.

Here are the expected cash flows for three projects:

	Cash Flows (dollars)
Project	Year:	0			1			2			3			4
A			6,200		+	1,300		+	1,300		+	3,600			0
B			2,200			0		+	2,200		+	2,600		+	3,600
C			6,200		+	1,300		+	1,300		+	3,600		+	5,600

c1.	What is the payback period on each of the projects?

Project	Payback period
A	_____ years
B	_____ years
C	_____ years

c.2

If the opportunity cost of capital is 10%, calculate the NPV for projects A, B, and C.

Project A NPV: $_____

Project B NPV: $_____

Project C NPV: $_____