1. The following data concern an investment project:

The working capital will be released for use elsewhere at the conclusion of the project.

Required:

Compute the project's net present value.

2. Bradley Company's required rate of return is 14%. The company has an opportunity to be the exclusive distributor of a very popular consumer item. No new equipment would be needed, but the company would have to use one-fourth of the space in a warehouse it owns. The warehouse cost $200,000 new. The warehouse is currently half-empty and there are no other plans to use the empty space. In addition, the company would have to invest $100,000 in working capital to carry inventories and accounts receivable for the new product line. The company would have the distributorship for only 5 years. The distributorship would generate a $17,000 annual net cash inflow.

Required:

What is the net present value of the project at a discount rate of 14 per cent? Should be project be accepted?

3. (Ignore income taxes in this problem.) Tranter, Inc., is considering a project that would have a ten-year life and would require a $1,200,000 investment in equipment. At the end of ten years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows:

All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 12%.

Required:

a. Compute the project's net present value.
b. Compute the project's internal rate of return to the nearest whole percent.

4. (Ignore income taxes in this problem.) Bill Anders retires in 8 years. He has $650,000 to invest and is considering a franchise for a fast-food outlet. He would have to purchase equipment costing $500,000 to equip the outlet and invest an