1. A firm has undertaken a feasibility study to evaluate a project that has the following estimated cashflows:

• Increased sales to business of $140,000 for the next 5 years (starting in one year's time)
• Increased costs of $20,000 for the next two years (starting in one year's time)
• The initial capital expenditure required is $100,000.
• The study cost $10,000 to conduct.

-Amount borrowed to fund project is $200,000 with interest of 8% pa paid yearly.

If the firm is facing a discount rate of 10%, what is the NPV of this project?

a. $395,999

b. $516,155

c. $455,420

d. $506155

2. Tank Ltd is considering undertaking the purchase of a new piece of equipment that is expected to increase revenue by $12,000 each year for six years. The equipment will increase costs $4,000 each year for six years. It costs $32,000 to purchase today and for tax purposes must be depreciated down to zero over its 8 year useful life using the straight-line method. If Tank is actually forecasting a salvage (for capital budgeting purposes) of $5,000 after 6 years, what is the machine's net cash flow (after tax) for year 6? Assume the tax rate is 30%.

		a. 12,400
		b. 11,800
		c. 13,000
		d. 12,700 3.

1. What is the Net Present Value of a project with a discount rate of 6% p.a.compounded annually, whose net cash flows are forecast to be: (Choose the closest answer)

   Year 0:	$10,000 outflow
   Year 1:	$5,000 inflow
   Year 2:	$4,000 inflow
   Year 3:	$3,000 inflow
   Year 4:	$2,000 inflow

   a		2,677.32
   b		2,459.95
   c		3,207.55
   d		2,380.01