It is Jan 1, 2016 and Timco completed the project referenced in questions 4 and 5 above. The project went well. The company is now planning to make a special add-on investment that will enhance the usefulness of the new plane. The changes will cost $3 million in total, with the expenditure occurring at the end of the year three years from today. The changes will bring year-end after-tax cash inflows of $2 million at the end of the two succeeding years. It will then cost $.5 million to dispose of specialized waste generated by the project at the end of the 3rd year of operation.

(a) What is the project's IRR? (2 marks)

(b) If the Timco requires a minimum return of 10%, should this project be accepted? Why? What if the minimum return was 15%? (3 marks)

9. Timco is now considering two independent projects utilizing the internal rate of return technique. Project A has an initial investment of $80,000 and cash inflows at the end of each of the next five years of $25,000. Project B has an initial investment of $120,000 and cash inflows at the end of each of the next four years of $40,000. (3 marks)

(a) Which projects should be accepted if the cost of capital is 15%?

(b) Which projects should be accepted if the cost of capital is 10%