4. economic versus accounting valuation Ralph is contemplating a capital investment project. No taxes are present, the initial outlay will be 10,000, followed by end of year inflows for the next 3 years, as displayed below.

t = 1 t = 2 t = 3 5,000 x x

(a) Determine x such that the project has a present value of precisely zero if the interest rate is r = 9%.

(b) Determine the end of period economic value of the project at the end of each period, as well as its economic income each period.

(c) What accounting income will be reported the first year if straight line depreciation is used?