1. Obsolete Technology is considering purchase of a new computer system to help handle its warehouse inventories. The system costs $50,000, is expected to last 4 years, and should reduce the cost of managing inventories by $22,000 a year. The opportunity cost of capital is 10%. Should Obsolete go ahead? -100 2. From the table below Year Project A Project B 0 -100 1 40 50 2 40 50 3 40 50 4 40 a) If the opportunity cost of capital is 11% which of these projects is worth pursuing? b) Which project would you choose if the opportunity cost of capital is 16%? 3. A house painting business had revenues of $16,000 and expenses of $9,000. There were no depreciation expenses. However, the business reported the following changes in various components of working capital: Beginning End Accounts Receivable $1,200 $4,500 Accounts Payable S600 S200 Calculate Net Cash Flow for the business for this period 4. A regional super market chain is deciding whether to install a machine in each of its stores. Each machine costs $250,000. Projected income per machine is as follows: Figs are all in s Sales 250,000 300,000 300,000 250,000 250,000 Operating Expenses 200,000 200,000 200.000 200.000 200.000 Depreciation 50.000 50,000 50,000 50.000 50,000 Accounting Income O 50.000 50.000 0 a) Why would the store continue to operate a machine in Year 4 and 5 if it produces no profits? b) What are the cash flows for investing in a machine? Assume each machine is completely depreciated and has no salvage value at the end of its 5 years life