1. You own Jack-in-the-Box franchises. Given the increase in the minimum wage, you consider replacing human customer service works with ATM-like ordering machine. You believe revenues will not change. Today it will cost $250,000 to install the ordering machines in each store. You also estimate it will cost an additional $10,000 per year to maintain and power the machines per year starting a year from today. On the other hand, if you keep your existing employees, you will have no costs today. However, you will need to pay the employees $45,000 per year (starting a year from today). If you think the machines will last 10 years, your discount rate is 6%, your tax rate is 30%, the equipment has no salvage value, and you use straight line depreciation for any initial investments, should you install the machines (need numerical proof for a correct answer)?You own Jack-in-the-Box franchises. Given the increase in the minimum wage, you consider replacing human customer service works with ATM-like ordering machine. You believe revenues will not change. Today it will cost $250,000 to install the ordering machines in each store. You also estimate it will cost an additional $10,000 per year to maintain and power the machines per year starting a year from today. On the other hand, if you keep your existing employees, you will have no costs today. However, you will need to pay the employees $45,000 per year (starting a year from today). If you think the machines will last 10 years, your discount rate is 6%, your tax rate is 30%, the equipment has no salvage value, and you use straight line depreciation for any initial investments, should you install the machines (need numerical proof for a correct answer)?

2. You are exploring the possibility of building fueling planes for the U.S. Air Force. Before you can win the contract, you need to build a prototype plane to prove your design is viable. You estimate you will need to invest $2 billion today and R&D will take 5 years. If you win the contract after R&D, you estimate you will need to spend $5 billion to build the factory that day. You then will receive $850 million per year for 20 years starting 1 year from that day. If you have a 40% chance of winning the contract and your discount rate is 7%, should you make the prototype?