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Ch . 9 : Questions 7 & 8 ( Questions and Problems section )
7 . Calculating IRR [ LO5 ] A firm evaluates all of its projects by applying the IRR rule . If the required return is 14 percent , should the firm accept the following project ?
8 . Calculating NPV [ LO1 ] For the cash flows in the previous problem , suppose the firm uses the NPV decision rule . At a required return of 11 percent , should the firm accept this project ? What if the required return is 24 percent ?
Ch . 10 : Questions 3 & 13 ( Questions and Problems section )
3 . Calculating Projected Net Income [ LO1 ] A proposed new investment has projected sales of $ 635,000 . Variable costs are 44 percent of sales , and fixed costs are $ 193,000 ; depreciation is $ 54,000 . Prepare a pro forma income statement assuming a tax rate of 35 percent . What is the projected net income ?
13 . Project Evaluation [ LO1 ] Dog Up ! Franks is looking at a new sausage system with an installed cost of $ 540,000 . This cost will be depreciated straight-line to zero over the project ’ s five-year life , at the end of which the sausage system can be scrapped for $ 80,000 . The sausage system will save the firm $ 170,000 per year in pretax operating costs , and the system requires an initial investment in net working capital of $ 29,000 . If the tax rate is 34 percent and the discount rate is 10 percent , what is the NPV of this project ?
Ch . 11 : Questions 1 & 7 ( Questions and Problems section )