aiolos

Aiolos plc. is considering investing in a new machine that costs 100,000. The machine is expected to provide additional revenue of 50,000 per year for four years and to increase operating costs by 20,000 per year. The machine is expected to have four years of useful life and will be depreciated on a straight-line basis over four years and has a zero salvage value at the end of the 4th year. The purchase of the machine will be financed 60% by retained earnings and 40% by a new bank loan, at a 4% interest. The current market price of Aiolos plc. is 5, they recently paid a dividend of 0.30 per share, while the dividend growth rate is 2%. Corporate tax rate is 25%. Answer the five next questions: What is the annual net profit of the project for years 1 to 4 ? Select one: a. 30,000 b. 28,750 c. 3.750 d. 33,400 e. 5,000