Bus Fin 620 Practice Ch. 8 Sniff, Growl, and Bite, Inc. is planning a project in which it will create and market a board game about keeping children safe with family pets. The project will last for three years. The costs of the project would be $100,000 if the project started today, $90,000 if it started in one year, and $80,000 if it started in two years. The required after-tax return on this project is 9.8%. After-tax cash flows from the project, whenever it is started, will be $42,000 in the first year of the project, $50,000 in the second year, and $60,000 in the third and final year. When should the company commence the project? Do not do the project, it has a negative NPV Start today Start in one year Start in two years Sniff, Growl, and Bite, Inc. needs to purchase a new vacuuming system. The system will last for 8 years. The initial cost of the system will be $36,000, and the maintenance cost will be $3500 per year for the first four years, payable at the end of the year, and $4500 per year for the final four years, also payable at the end of the year. In 8 years the system can be sold for salvage, and the after-tax cash flows from the sale will be $6000. The company’s hurdle rate on this project is 12.3% annually. What is the effective annual cost? $8539.84 $10563.90 10726.56 12045.93 In order to increase the value of its shares, Sniff, Growl, and Bite, Inc. has issued bonds, and in the last year, the investor required return on these bonds has decreased, since the inflation rate has gone down. Regarding the vacuum system in the last problem, assume the hurdle rate goes down to 10.8%. What is the effect on the Effective Annual Cost? It goes up It goes down It is unaffected There is insufficient information to be able to answer the question.