1

1. Use the following information to answer the questions in this quiz.

   Please show your work by submitting a Word, Excel, or JPEG file in the "Project 2 Drop Box".

   INFORMATION OLD MACHINE:
   Original Purchase Price		$ 550,000.00
   Original Life		10 YEARS
   Remaining Life		5 YEARS
   Straight line depreciation in use
   Salvage Value		$ 50,000.00
   Current Fair Market Value		$ 260,000.00
   INFORMATION NEW MACHINE A:
   Purchase Price		$895,000.00
   Estimated Life		5 YEARS
   Use Straight Line Depreciation Method
   Estimated Salvage Value		$ 10,000.00
   Estimated Net Operating Cash Flow Increase/Decrease (Prior to Depreciation and Taxes)
   End of Year 1		$ 100,000.00
   End of Year 2		$ 150,000.00
   End of Year 3		$ 250,000.00
   End of Year 4		$ 200,000.00
   End of Year 5		$ 200,000.00
   ASSUMPTIONS:
   Tax Rate		40%
   WACC Rate		7%

   If you keep the old machine, the NPV is:

   A.	118,567
   B.	117,653
   C.	30,489
   D.	300,410

40 points

QUESTION 2

1. If you sell the old machine and buy new machine A, the NPV will be:

   10,619

   -4,995

   -5,859

   2,907