1. Hathaway, Inc., a resort management company, is refurbishing one of its hotels at a cost of $8,554,779. Management expects that this will lead to additional cash flows of $1,970,000 for the next six years. What is the IRR of this project? If the appropriate cost of capital is 12 percent, should Hathaway go ahead with this project? (Round answer to 2 decimal places, e.g. 5.25%.)

The IRR of this project is %

The firm should acceptreject the project

2. Capitol Corp. management is expecting a project to generate after-tax income of $55,970 in each of the next three years. The average book value of the project’s equipment over that period will be $231,300. If the firm’s investment decision on any project is based on an ARR of 37.5 percent. (Round answer to 1 decimal places, e.g. 5.2%.)

What is the project’s accounting rate of return?

Accounting rate of return is

%

Should the firm accept this project?

The firm should rejectaccept the project.

3. Northern Specialties just purchased inventory-management computer software at a cost of $1,771,950. Cost savings from the investment over the next six years will produce the following cash flow stream: $203,340, $253,240, $322,600, $544,250, $782,320, and $604,740. What is the payback period on this investment? (Round answer to 2 decimal places,e.g. 15.25.)

Payback period is

years

4. Management of Franklin Mints, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of $312,500. They project that the cash flows from this investment will be $99,000 for the next seven years. If the appropriate discount rate is 14 percent, what is the NPV for the project? (Enter negative amounts using negative sign, e.g. -45.25. Do not round discount factors. Round answer to 2 decimal places, e.g. 15.25.)

NPV

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$