1). Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost \$1,776,329. have a life of five years, and would produce the cash flows shown in the following table.

Year Cash Flow
1 \$613,201
2 -225,580
3 1,015,102
4 1,011,437
5 844,196

What is the NPV if the discount rate is 15.69 percent? (Enter negative amounts using negative sign e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25.)

2). Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of \$12.10 million. This investment will consist of \$2.60 million for land and \$9.50 million for trucks and other equipment. The land, all trucks, and all other equipment is expected to be sold at the end of 10 years at a price of \$5.15 million, \$2.11 million above book value. The farm is expected to produce revenue of \$2.05 million each year, and annual cash flow from operations equals \$1.91 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 9 percent. Calculate the NPV of this investment. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.)
The project should be: Accepted or Rejected.

3). Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company money, the cost of the system continues to decline. The Bell Mountain s opportunity cost of capital is 10.4 percent, and the costs and values of investments made at different times in the future are as follows:

Year Cost Value of Future Savings
(at time of purchase)
0 \$5,000 \$7,000
1 4,250 7,000
2 3,500 7,000
3 2,750 7,000
4 2,000 7,000
5 1,250 7,000

Calculate the NPV of each choice. (Round answers to the nearest whole dollar, e.g. 5,275.)

The NPV of each choice is:

NPV0 = \$

NPV1 = \$

NPV2 = \$

NPV3 = \$

NPV4 = \$

NPV5 = \$

Suggest when should Bell Mountain buy the new accounting system?

 4).

 Chip s Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for \$20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 92 percent as high if the price is raised 12 percent. Chip s variable cost per bottle is \$10, and the total fixed cash cost for the year is \$100,000. Depreciation and amortization charges are \$20,000, and the firm has a 30 percent marginal tax rate. Management anticipates an increased working capital need of \$3,000 for the year. What will be the effect of the price increase on the firm s FCF for the year?
 (Round answers to nearest whole dollar, e.g. 5,275.)
 At \$20 per bottle the Chip s FCF is \$ and at the new price Chip s FCF is \$.
 \$

5).Capital Co. has a capital structure, based on current market values, that consists of 48 percent debt, 11 percent preferred stock, and 41 percent common stock. If the returns required by investors are 9 percent, 12 percent, and 17 percent for the debt, preferred stock, and common stock, respectively, what is Capital s after-tax WACC? Assume that the firm s marginal tax rate is 40 percent.(Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

 After tax WACC =