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1). Dog Up! Franks is looking at a new sausage system with an installed cost of $335,400. This cost will be depreciated straight-line to zero over the project's 8-year life, at the end of which the sausage system can be scrapped for $51,600. The sausage system will save the firm $103,200 per year in pretax operating costs, and the system requires an initial investment in net working capital of $24,080.

  If the tax rate is 22 percent and the discount rate is 15 percent, what is the NPV of this project?

2). Quad Enterprises is considering a new 5-year expansion project that requires an initial fixed asset investment of $1.782 million. The fixed asset will be depreciated straight-line to zero over its 5-year tax life, after which time it will be worthless. The project is estimated to generate $1,584,000 in annual sales, with costs of $633,600.  If the tax rate is 24 percent, what is the OCF for this project?

3). Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 10 years ago for $5 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $9.6 million. The company wants to build its new manufacturing plant on this land; the plant will cost $12.2 million to build, and the site requires $1,440,000 worth of grading before it is suitable for construction.   What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?

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