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5-18,,Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for Tokyo Rubber Company is 10 percent.,,Year Dry Prepreg Solvent Prepreg,0 -$1,400,000 -$600,000,1 900,000 300,000,2 800,000 500,000,3 700,000 400,000,,a). based on the payback period, which project should be taken?,b). based on the NPV, which project should be taken?,c). based on the IRR, which project should be taken?,d). based on this analysis, is incremental IRR analysis necessary? If yes, please conduct the analysis.,,5-12,,The Robb Computer Corporation is trying to choose between the following two mutually exclusive design projects:,,Year Cash Flow (I) Cash Flow (II),0 -$40,000 -$15,000,1 21,000 8,500,2 21,000 8,500,3 21,000 8,500,a). if the required return is 10 percent and Robb Computer applies the profitability index decision rule, which project should the firm accept?,,b). if the company applies the NPV decision rule, which project should it take?,c). explain why your answers in (a) and (b) are different.,,5-4,,An investment project costs $10,000 and has annual cash flows of $2,600 for six years. What is the discounted payback period if the discount rate is 0 percent? What if the discount rate is 10 percent? If it is 15 percent?,,4-32,,Barrett Pharmaceuticals is considering a drug project that costs $150,000 today and is expected to generate end of year annual cash flows of $13,000 forever. At what discount rate would Barrett be indifferent between accepting or rejecting the project?,,4-12,,Investment X offers to pay you $5,500 per year for nine years, whereas Investment Y offers you $8,000 per year for five years. Which of these cash flow streams has the highest present value of the discount rate 5 percent? If the discount rate is 22 percent?,,4-8 ,,During 2003, Sotheby’s sold the Edgar degas bronze sculpture Petite danseuse de Quartorze ans at auction for a price of $10,311,500. Unfortunately for the previous owner, he had purchased it in 1999 at a price of $12,377,500. What was his annual rate of return on this sculpture?,