Projects A and B are mutually exclusive and both have an initial cost of $60,000. Project A has annual cash flows for three years of $28,100, $32,500, and $43,200, respectively. Project B has annual cash flows for three years of $27,900, $31,000, and $45,000. What is the crossover rate?

a. 5.86 percent

b. 1.68 percent

c. 6.16 percent

d. 5.23 percent

e. 9.20 percent

You are considering two independent projects. Project A has an initial cost of $148,000 and cash inflows of $46,000, $79,000, and $51,000 for years 1 to 3, respectively. Project B costs $148,000 with expected cash inflows for years 1 to 3 of $50,000, $30,000, and $100,000, respectively. The required return for both projects is 16 percent. Based on IRR, you should:

a. Reject both projects.

b. Accept Project B and reject Project A.

c. Accept both projects.

d. Accept Project A and reject Project B.

e. Accept either one of the projects, but not both.

Aeroteck is considering the purchase of a new machine for $50,000, installed (shipping cost is also included). The machine has a tax life of 5 years, and it can be depreciated according to the depreciation rates below. The firm expects to operate the machine for 4 years and then to sell it for $21,500. If the marginal tax rate is 40%, what will the after-tax salvage value be when the machine is sold at the end of Year 4?

year depreciation

1 0.20

2 0.32

3 0.19

4 0.12

5 0.11

6 0.06

a. $13,529

b. $18,908

c. $18,419

d. $16,300

e. $12,551