1) You are evaluating the purchase of equipment for a house painting business.The total cost of the equipment is$27,000. You paida consultant $1,000 to estimate the revenues expected from the equipment. The firm selling theequipment charges $600 for shipping.

The project's incremental operating cash flows before taxes will be $12,000 per year for fouryears. At the end of fouryears the equipment will have no value and will be scraped. The equipment has a three-year useful life and will be depreciated using the three-year MACRS depreciation schedule (assume these depreciation percentages: Yr 1: 33.3%, Yr 2: 44.5%, Yr 3: 14.8%, and Yr 4: 7.4%). The tax rate is 34% and the firm's required rate of return is 17%.

1. 1. Calculate the cash flows from Years 0 through 4.
2. 2.Shouldyoupurchasetheequipment?

2)

Indicate which of the following bonds seems to be reported incorrectly with respect to discount, premium, or par and explain why.

Bond	Price	Coupon Rate	Yield to Maturity
A	105	9%	8%
B	100	6%	6%
C	101	5%	4.5%
D	102	0%	5%