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Your goal is to develop annual cash flows for this project and calculate NPV, IRR, MIRR and PI to help investors make decisions. 1. Basic problem. Investment group ARM is considering a new 5-year project. It will require the purchase of a $3.5 million machine with an additional $150,000 for shipping and $220,000 for installation. The machine will be depreciated straight-line to zero over its five-year economic life, after which it will have no salvage value. The project is expected to have sales of 50,000 units per year at a price of $50 per unit. There will be fixed costs of $30,000 per year and variable cost per unit of $25 per unit. The companys marginal tax rate is 35%. Their cost of capital is 8%. 2. Accelerated depreciation and sale of a capital asset. Same as in problem 2 except that the equipment will be depreciated as a MACRS 6-year asset and can be sold at the end of 5 years for $400,000. 3. Dealing with growth. Same as the problem above except that the unit sales are expected to grow at a rate of 6% per year. Costs and prices are subject to inflation of 5% per year. 4. Dealing with capacity limits. Same as in problem 4 except that production cannot exceed the machine capacity of 70,000 units per year 5. Dealing with working capital needs. Same as in problem 3 except that the company will need working capital each year equal to 5% of next years sales.

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