Assume you have been asked to evaluate an investment in capital equipment for the production of biofuels. The machine will cost $215,000 and it will last 10 years (useful and depreciation lifespans). Using straight-line depreciation, the salvage value for the investment is $0. You expect the equipment to have a terminal value of $20,000 at the end of the investment period.

The machine has an annual maintenance cost of $6,000. Your marginal tax rate is 30%; remember that you get to keep (1-m) for everything other than the depreciation shield on an after-tax basis (its simply m * depreciation shield). Your after tax-cost of capital (discount rate) is 9.5%. Labor costs in the production of biofuels are $17,500/year. The machine will produce 25,500 units of biofuel annually that will be sold at $2.50/unit.

Fill in the missing pieces (a through h) in the table below to complete the NPC analysis (16 points or 2 points per missing piece).

Item	Pre-tax	After-tax	Time	Growth Rate	Discount Rate	P.V. Factor	Present Value
Machine	-$215,000	-$215,000	0	-	0.095	1.0	-$215,000.00
Depr. Shield	21,500		1-10	0	0.095
Term.Valuea	20,000		10	0	0.095		$5,649.20
Repairs	-6,000		1-10	0	0.095
NPV							-$195,223.51
NPC							$195,223.51

1. After-tax annual amount = PV(i/(1-(1+i)^-n)) = 1/(PV Factor). You will need the following formulas to complete the table: [1-(1+i)^-n]/i; (1+r)^-n; Hint: After-tax cost of repairs is calculated exactly the same as the after-tax terminal value.