1. A firm is considering investing $150,000 in a new manufacturing equipment generating the flowing cash flow income. The firm in planning to fully depreciate the asset in 5 years on a MACRS. The expected before tax MARR for this investment is 20%.

A.1)Would you recommend this investment based on before tax EBIT?

A.2) Would you still recommend this investment if after tax MARR is 8%?

\begin{tabular}{|c|c|c|c|c|c|c|c|c|} \hline Year & \begin{tabular}{c} Initial \\ investment \end{tabular} & \begin{tabular}{c} Gross \\ income \end{tabular} & M\&O & NOI/EBIT & Dep. & \begin{tabular}{c} NOP after \\ Dep. \\ credit \end{tabular} & \begin{tabular}{c} Taxes @ \\ 40% rate \end{tabular} & NOPAT \\ \hline 0 & 150 & & & & & & & \\ \hline 1 & & 100 & 40 & & & & & \\ \hline 2 & & 100 & 40 & & & & & \\ \hline 3 & & 100 & 40 & & & & & \\ \hline 4 & & 100 & 40 & & & & & \\ \hline 5 & & 100 & 40 & & & & & \\ \hline \end{tabular}