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1. Joe and Rich are both considering investing in a project with the following cash flows....

1. Joe and Rich are both considering investing in a project with the following cash flows. Joe is content earning a 9 percent return but Rich desires a return of 16 percent. Who, if either, should accept this project? Year 0 : -25,000 Year1: 13,700 Year2: 18,400

2. Major Importers would like to spend $211,000 to expand its warehouse. However, the company has a loan outstanding that must be repaid in 2.5 years and thus will need the $211,000 at that time. The warehouse expansion project is expected to increase the cash inflows by $48,000 in the first year, $139,000 in the second year, and $210,000 a year for the following two years. Should the firm expand at this time? Why or why not?

3. Western Wear purchased some 3-year MACRS property 3 years ago. What is the current book value of this equipment if the original cost was $48,000? The MACRS allowance percentages are as follows, commencing with year one: 33.33, 44.45, 14.81, and 7.41 percent

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Year Cash flow 0 $ (25,000) 1 $ 13,700 21 $ 18,400 PVIF@10% 1.000 $ 0.909 $ 0.826 $ Present value (25,000.00) 12,454.55 15,20

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