A) A band is considering the purchase of new amplifiers for its upcoming tour. The bands manager tells them the amplifiers would cost $70000 in total and only last for the next 2 years while they tour North America and Europe. The band assumes the equipment will be too smashed up to have any value thereafter. The sound quality improvement is expected to increase concert revenues by $30000 in the first year and $30000 in the second year. The manager uses a 20% cost of capital. What is the present value of the first years revenue bump?

$70000

$25000

$30000

$25000

B) The owners of a convenience store want to install a new vending machine so that customers can purchase soft drinks after hours. The machine costs $8800 to purchase and install and will require $295 worth of maintenance each year. Incremental sales related to the machine will amount to $1450 per year. Assume the discount rate is 9% and the machine has a life span of 20 years. What is the net present value of the project?

$1743

$11698

$4053

$4436