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  3. a) your firm is trying to decide between two diffe

a) Your firm is trying to decide between two different projects. Your boss has asked...

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Accounting

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a) Your firm is trying to decide between two different projects. Your boss has asked you to use the MIRR criteria at the cost of capital of 13%. Which of these projects will you choose? (7 points) Year Project A Project B -$100,000 -$85,000 $115,000 $25,000 $120,000 $40,000 $65,000 $85,000 $55,000 $110,000 $12,000 $130,000 b) The Reynold Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,100,000, and it would cost another $20,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $790,000. The MACRS rates for the first 3 years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $16,500. The sprayer would not change revenues, but it is expected to save the firm $400,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 28%. Find the initial investment outlay, the annual depreciation, the yearly operating cash flow, the terminal cash flow, and decide whether the firm should accept the project. (8 points)

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