1. The financial manager at Starbucks Industries is considering an investment that requires an initial cost of $25,000 and is expected to result in cash inflows of $3,000 at the end of year 1, $6000 at the end of years 2 and 3 ($6000 in each year), $10,000 at the end of year 4, $8,000 at the end of year 5, and $7,000 at the end of year 6.

a) Draw and label a time line using the set up for it as shown below and depict the initial cost and the cash inflows associated with Starbuck Industries proposed investment. Use a positive sign (+) for a cash inflow and a negative sign (-) for a cash outflow.

YEAR (end of year)	Cash Flow
0
1
2
3
4
5
6

b) What is the future value (FV) of this investment at the end of year 6 with a 5% interest rate?

c) What is the present value (PV) of this investment with a 5% interest rate?

d) Assume the initial cost is like an expense that it is not recoverable: Is there a potential financial loss from this investment? Or, is there a potential financial gain? What is the value of that loss or gain?