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Year 4 $17 $61 You are choosing between two projects. The cash flows for the projects are given in the following table ($ million) Project Year Year 1 Year 2 Year 3 - $51 $25 $20 $20 B - $99 $19 $40 $49 a. What are the IRRs of the two projects? b. If your discount rate is 5.1%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently? a. What are the IRRs of the two projects? The IRR for project Ais I % (Round to one decimal place.) You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $9,500 per year if you sign a guaranteed 5-year lease the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed below (the equipment has an economic life of 5 years). If your discount rate is 7.5%, what should you do? Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 - $39,600 - $2,100 - $2,100 -$2,100 - $2,100 - $2,100 The net present value of the leasing alternative is $. (Round to the nearest dollar.) Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain but lasts much longer than the other. Gateway's discount rate is 10.9%. The company plans to continue with one of the two models for the foreseeable future. Based on the costs of each shown below, which should it choose? (Note: dollar amounts are in thousands.) Model Old Reliable Short and Sweet Year 0 -$199 - $99 Year 1 -$4.1 -$1.8 Year 2 - $4.1 -$1.8 Year 3 - $4.1 - $1.8 Year 4 -$4.1 -$1.8 Yoar 5 - $4.1 Yoar 6 -$4.1 Year 7 -$4.1 Based on the costs of each model, which should it choose? (Select the best choice below.) O A. Gateway Tours should choose Old Reliable because it lasts longer. OB. Gateway Tours should choose Short and Sweet because the equivalent annual annuity of its costs is smaller. OC. Gateway Tours should choose Short and Sweet because the NPV of its costs is smaller. OD Gateway Tours should choose Old Reliable because the equivalent annual annuity of its costs is smaller Year 4 $17 $61 You are choosing between two projects. The cash flows for the projects are given in the following table ($ million) Project Year Year 1 Year 2 Year 3 - $51 $25 $20 $20 B - $99 $19 $40 $49 a. What are the IRRs of the two projects? b. If your discount rate is 5.1%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently? a. What are the IRRs of the two projects? The IRR for project Ais I % (Round to one decimal place.) You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $9,500 per year if you sign a guaranteed 5-year lease the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed below (the equipment has an economic life of 5 years). If your discount rate is 7.5%, what should you do? Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 - $39,600 - $2,100 - $2,100 -$2,100 - $2,100 - $2,100 The net present value of the leasing alternative is $. (Round to the nearest dollar.) Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain but lasts much longer than the other. Gateway's discount rate is 10.9%. The company plans to continue with one of the two models for the foreseeable future. Based on the costs of each shown below, which should it choose? (Note: dollar amounts are in thousands.) Model Old Reliable Short and Sweet Year 0 -$199 - $99 Year 1 -$4.1 -$1.8 Year 2 - $4.1 -$1.8 Year 3 - $4.1 - $1.8 Year 4 -$4.1 -$1.8 Yoar 5 - $4.1 Yoar 6 -$4.1 Year 7 -$4.1 Based on the costs of each model, which should it choose? (Select the best choice below.) O A. Gateway Tours should choose Old Reliable because it lasts longer. OB. Gateway Tours should choose Short and Sweet because the equivalent annual annuity of its costs is smaller. OC. Gateway Tours should choose Short and Sweet because the NPV of its costs is smaller. OD Gateway Tours should choose Old Reliable because the equivalent annual annuity of its costs is smaller