Case 1

John was given a task of calculating NPV of the new project which is being considered by the ABS Co which has been working in the industry of furniture manufacturing for more than 15 years. The company is thinking of whether or not to purchase the equipment which costs 2.5 mln USD and 150000 USD to install. The equipment is expected to use 10 year MACRS rates but the company will sell the equipment after six years for the price of 1000000 USD. Tax rate is 30%. Assume that this possible salvage value will be considered just to calculate after tax salvage value of equipment at the end of six years. The riskiness of the project was estimated to be 18% as a discount rate.

Total amount of Revenues of the company after the implementation of this equipment are expected to be as follows:

	Year1	Year2	Year3	Year4	Year5	Year6
Revenue	2501458	3605412	4652154	5264152	6253415	7854215

The existing capacity of the company was allowing the company to do the following forecasts for the revenues

	Year1	Year2	Year3	Year4	Year5	Year6
Revenue	250145	360541	465215	526415	625341	785421

COGS and operating expenses (excluding depreciation) are expected to be 50% and 25% of new amounts of revenues respectively.

Help John calculate NPV of this project and make a recommendation.

Case 2

Carlo and Maria are both 46 years old and they are thinking of whether or not they can afford to retire at age of 60. They want to be able to spend 5200 USD after the retirement till the age of 82 on monthly basis as a result of investing all of their saving on the date of retirement into a financial institution at 3% p.a

They have some financial instruments in which they have been investing already.

Type of Account	Current Balance	Average Return	Compound frequency	Further contribution
Joint IRA	74203	3,90%	monthly	350
Bond Fund	39937	3,50%	monthly	150
Savings	1200	2,80%	quarterly
Bank CDs	46889	4,40%	semiannual
Income Fund	12376	7,50%	monthly
Money MKT	36737	4,80%	daily
Index Fund	315092	3,90%	monthly
Index Fund TSA	353039	13,10%	monthly	860
Utilities Stock Fund	28800	7,50%	monthly

How do you think can they afford to retire at age of 60? Can they increase the amount of their spending after the retirement if they are expecting to spend for further 22 years after the retirement ?