1. A project will produce an operating cash flow of $105,000 a year for three years. The initial cash outlay for equipment will be $193,000. The net aftertax salvage value of $32,000 will be received at the end of the project. The project requires $21,000 of net working capital that will be fully recovered. What is the net present value of the project if the required rate of return is 12 percent?

$35,640.61

$41,536.72

$48,415.08

$54,320.15

$60,969.25

2. Assume a machine costs $810,000 and lasts five years before it is replaced. The operating cost is $41,400 a year. Ignore taxes. What is the equivalent annual cost if the required rate of return is 12 percent? (Hint: the EAC should account for both initial investment and annual operating costs)

$284,357.17

$266,101.88

$245,734.66

$229,570.94

$205,338.61