Use the data below for problems 6 to 10. Year Proj Y Proj Z 0 ($210,000) ($210,000) 1 200,000 95,000 2 95,000 78,000 3 — 73,000 4 — 87,500 The projects provide a necessary...

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Finance

Use the data below for problems 6 to 10.
Year
Proj Y
Proj Z
0
($210,000)
($210,000)
1
200,000
95,000
2
95,000
78,000
3
—
73,000
4
—
87,500

                 The projects provide a necessary service, so whichever one isselected is expected to be repeated into the foreseeable future.Both projects have an 11% cost of capital.
6.   What is each project’s initial NPV withoutreplication?
7.   What is each project’s equivalent annualannuity?
8.   Now apply the replacement chain approach todetermine the shorter projects’ extended NPV. Which project shouldbe chosen?
9.   Now assume that the cost to replicate Project Yin 2 years will increase to $140,000 because of inflationarypressures. How should the analysis be handled      now, and which project should bechosen?
10. You are also considering another project which has aphysical life of 3 years; that is, the machinery will be totallyworn out after 3 years. However, if the          project wereterminated prior to the end of 3 years, the machinery would have apositive salvage value. Here are the project’s estimated cashflows:

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Use the data below for problems 6 to 10.YearProj YProj Z0($210,000)($210,000)1200,00095,000295,00078,0003—73,0004—87,500 The projects provide a necessary service, so whichever one isselected is expected to be repeated into the foreseeable future.Both projects have an 11% cost of capital.6. What is each project’s initial NPV withoutreplication?7. What is each project’s equivalent annualannuity?8. Now apply the replacement chain approach todetermine the shorter projects’ extended NPV. Which project shouldbe chosen?9. Now assume that the cost to replicate Project Yin 2 years will increase to $140,000 because of inflationarypressures. How should the analysis be handled now, and which project should bechosen?10. You are also considering another project which has aphysical life of 3 years; that is, the machinery will be totallyworn out after 3 years. However, if the project wereterminated prior to the end of 3 years, the machinery would have apositive salvage value. Here are the project’s estimated cashflows:

Year	Proj Y	Proj Z
0	($210,000)	($210,000)
1	200,000	95,000
2	95,000	78,000
3	—	73,000
4	—	87,500