Boomerang Bungee Corp. is considering the following project. Determine the equal annual annuity for the project if

the cost of capital is 14%.

Initial Investment: $75,000

Year Cash Inflows

1 $30,000

2 $35,000

3 $40,000

a.

$2,259.62

b.

$4,355.25

c.

$7,768.67

d.

$5,527.89

Outback is purchasing a new machine that will cost $98,000. The machine will qualify as MACRS 5-year property but

has an economic life of 8 years. The new machine is expected to increase revenues by $35,000 per year, and

operating costs are expected to increase by $15,000 per year. If the firm's marginal tax rate is 34 percent and the first

year's depreciation rate is 20 percent, what is the net cash flow in the first year.

a.

$7,984

b.

$26,034

c.

$19,864

d.

$264