Every two years, Warrior Lacrosse develops a new lacrosse stickdesign. Over the past year, the company has invested $25,000 intheir latest stick, the Warrior-X. In addition, the firm has hireda consultant, for $10,000 to determine whether there will be amarket for the stick. The consultant has advised the firm to goahead and start production. Warrior expects to the new equipmentneeded to mold the stick to cost $500,000. The equipment will bedepreciated using 3-year MACRS. In three years, Warrior plans tosell the equipment for $25,000. The company expects to produce sellthe new stick line for 3 years. They predict that they can sell300,000 sticks for $200 each in each of the three years. During thefirst year, they company expects sales from its current model,Warrior-Cradle to decline by $100,000. After that, the WarriorCradle will no longer be produced. The company predicts thatoperating costs for the Warrior-X will be 25% of sales. If thecompany’s tax rate is .21 and their required return is .09, shouldthe stick be produced? Please show the project’s NPV, IRR andProfitability Index

3- year MACRS Depreciation

(1) .3333

(2) .4444

(3) .1482

(4) .0742

Please base your answers to questions 2-6 on the information,below, for Projects A and B

	A	B
0	-90000	-2500
1	25000	1500
2	50000	1500
3	50000	1500
4	50000	1500
NPV PROFILE k	NPV’s for A	NPV’s for B
0.05	$63,488.00	$2,818.93
0.075	$54,210.50	$2,523.99
0.08	$52,458.19	$2,468.19
0.1	$45,766.00	$2,254.80
0.125	$38,059.75	$2,008.46
0.15	$31,009.79	$1,782.47
IRRs	29%	47%

Question 2

If the required return for both projects A and B is 8% and theprojects are mutually exclusive, which project(s) should beselected?