dont look at forst question

Sally buys health insurance because she knows that she has health risks that wouldn't be obvious to an insurance company. Edward buys homeowners insurance and then is less careful to make sure he's put out his cigarettes. The example with Sally and the example with Edward illustrate moral hazard. best illustrates adverse selection; the example with Edward best illustrates moral hazard. and the example with Edward illustrate adverse selection. best illustrates moral hazard; the example with Edward best illustrates adverse selection. For the year ended Year 1 Year2 Year 3 Year 4 Year 5 Year 6 Year 7 Net income + Depreciation \&Amortization (non-cash) \begin{tabular}{|rrrrrrr|} \hline$8,742 & $10,905 & $13,227 & $15,715 & $17,133 & $17,502 & $17,878 \\ $2,184 & $2,293 & $2,407 & $2,528 & $2,604 & $2,656 & $2,709 \\ \hline \end{tabular} Changes in Net Working Capital - increase in accounts receivable + increase in accounts payable $4255($625) ($656) $446 ($689) $469 (\$724) $492 (\$456) $310 (\$313) $213 (\$319) $217 Cash flow from operations Capital expenditures Copex $ of revenue Cash flow from investment Debt paydown Debt borrowings Cash flow from Financing \begin{tabular}{|c|c|c|c|c|c|c|} \hline \$o & $0 & So & \$o & So & So & So \\ \hline so & so & So & \$o & so & $0 & $0 \\ \hline \end{tabular} Beginning Cash Balance Net Cash Flow $13,350 Woingeosicaninge \begin{tabular}{|c|c|c|c|c|c|c|c|c|} \hline end of & Year 0 & Year 1. & Year 2 & Year 3 & Year 4 & Year 5 & Year 6 & Year 7 \\ \hline \multicolumn{9}{|l|}{ ASSETS } \\ \hline \multicolumn{9}{|l|}{ Current Assets } \\ \hline \multirow{2}{*}{ Cash at Bank } & $13,350 & & & & & & & \\ \hline & & & & & & & & \\ \hline Accounts Receivable & $12,500 & $13,125 & $13,781 & $14,470 & $15,194 & $15,650 & $15,963 & $16,282 \\ \hline \multirow[t]{2}{*}{ AR turnover (days sales) } & 43.9 & 43.9 & 43.9 & 43.9 & 43.9 & 43.9 & 43.9 & 43.9 \\ \hline & & & & & & & 1 & \\ \hline \multicolumn{9}{|l|}{ Total Current Assets } \\ \hline & & & & & & & 3 & \\ \hline \multicolumn{9}{|l|}{ Fixed Assets } \\ \hline Gross PP\&E & $35,000 & & & & & & & \\ \hline Less: Accumulated D\&A & so & & & & & & & \\ \hline \multirow[t]{2}{*}{ Net PP\&E (net of D\&A) } & $35,000 & & & & & & & \\ \hline & & & & & & & & \\ \hline \multicolumn{9}{|l|}{ TOTALASSETS } \\ \hline & & & & & & & & \\ \hline \multicolumn{9}{|l|}{\begin{tabular}{l} LIABILITIES \\ Current Liabilities \end{tabular}} \\ \hline \begin{tabular}{l} Current Liabilities \\ Accounts Payable \end{tabular} & & & & & & & & \\ \hline Accounts Payable & $8,500 & $8,925 & $9,371 & $9,840 & $10,332 & $10,642 & $10,855 & $11,072 \\ \hline \multirow{2}{*}{ AP turnover (days sales) } & 29.8 & 29.8 & 29.8 & 29.8 & 29.8 & 29.8 & 29.8 & 29.8 \\ \hline & & & & & & & & \\ \hline \multicolumn{9}{|l|}{ Total Current Liabilities } \\ \hline \multirow{2}{*}{\multicolumn{9}{|c|}{ Long Term Liabilities }} \\ \hline & & & & & & & & \\ \hline Long Term Debt & $30,000 & $30,000 & $30,000 & $30,000 & $30,000 & S30n0 & sanno & \\ \hline \end{tabular} TOTAL ASsEIS LIABILITIES Current Liabilities Accounts Payable AP turnover (days sales) \begin{tabular}{rrrrrrrr} $8,500 & $8,925 & $9,371 & $9,840 & $10,332 & $10,642 & $10,855 & $11,072 \\ 29.8 & 29.8 & 29.8 & 29.8 & 29.8 & 29.8 & 29.8 & 29.8 \end{tabular} Total Current Liabilities Long Term Liabilities Long Term Debt $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 Total Long Term Liabilities EQUITY Owner's Funds Retained Earnings \begin{tabular}{|c|c|c|c|c|c|c|c|} \hline$20,000 & $20,000 & $20,000 & $20,000 & $20,000 & $20,000 & $20,000 & $20,000 \\ \hline$2,350 & & & & & & & \\ \hline \end{tabular} TOTAL EQUITY TOTAL LIABILITIES \& EQUITY error check Discounted Cash Flow Valuation