1. Consider a project with the following cash flows:

             After-Tax           After-Tax

            Accounting         Cash Flow

Year        Profits         from Operations

1              $799                   $750

2              $150                $1,000

3              $200                $1,200

Initial outlay = $1,500

Compute the profitability index if the company's discount rate is 10%.

2. We-Know-Widgets, Inc. is analyzing a project that requires an initial investment of $10,000, followed by cash inflows of $1,000 in Year 1, $4,000 in Year 2, and $15,000 in Year 3. The cost of capital is 10%. What is the profitability index of the project?

3. A project has an initial outlay of $4,000. It has a single payoff at the end of Year 4 of $6,996.46. What is the IRR for the project (round to the nearest percent)?

4. Given the following annual net cash flows, determine the IRR to the nearest whole percent of a project with an initial outlay of $1,520.

Year          Net Cash Flow

   1                  $1,000

   2                  $1,500

   3                  $500