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. Instructions: It is not necessary to show the calculation details. The results will be graded. 1. Greg Enterprises is considering a project whose cash flows are shown below. However, before the decision took place, the Federal Reserve increased interest rates and therefore the firm's discount rate. Calculate the NPVs before and after the rate increase. Calculate the IRRs before and after the rate increase. Should the project be accepted? Why or why not? 2. Jalen Inc. is considering projects Amber and Gerardo. The required return for each project is 10.25 percent. Calculate the NPV for each project. Which project should be accepted using NPV? 3. Calculate the IRR for each project. Which project should be accepted using IRR? 4. Calculate the profitability index for each project in question 2. Which project should be accepted? Why? Is it necessary to calculate the PI? Why or why not? 5. Maritza Inc. has to decide between a gas-powered and an electric-powered forklift. The company will buy only one forklift. The gas-powered forklift costs $17,500 and has cash flows of $5,000 per year for 6 years. The electric-powered forklift will cost $22,000 and has cash flows of $6,290 per year for 6 years. The cost of capital is 11%. Calculate the NPV and the IRR for each forklift. Which one should the company select? Why? 6. Calculate the PI for each forklift. Which one should the company select? Why? 7. Tohmer Inc. is considering building a new manufacturing plant. Plant A has state-ofthe-art equipment and will cost $50 million and provide cash flows of $8 million per year for 20 years. Plant B is less efficient and will cost $15 million and provide cash flows of $3.4 million per year for 20 years. The cost of capital is 9.2%. Calculate the NPV and the IRR for each plan. Hint: calculate the PV of the cash flows and subtract CFO to get NPV. Use NPV to calculate IRR. Which plant would you choose? Why? 8. Naseer Inc., is considering a project which will produce cash inflows of $145,000 a year for 2 years followed by $75,000 a year for the following 5 years. What is the NPV and IRR if the initial cost of the project is $400,000 ? Should the project be accepted or rejected? Why? The company uses 7.59% for evaluating projects. Use the frequency function to enter the 2 cash flows. 9. What are the strengths and weaknesses of the NPV method? 10. What are the strengths and weaknesses of the IRR method