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Question \#1 Mark Stevens is considering opening a hobby and craft store. He would need $120,000 to equip the business and another $50,000 for inventories and other working capital needs. Rent on the building used by the business will be $24,000 per year. Mark estimates that the annual cash inflow from the business will amount to $90,000. In addition to building rent, annual cash outflow for operating costs will amount to $30,000. Mark plans to operate the business for only six years. He estimates that the equipment and furnishings could be sold at that time for 10% of their original cost. The working capital will be fully released for other purposes at the end of the six years. Mark uses a discount rate of 12%. Required: Part A: Would you advise Mark to make this investment? Use the net present value method. Part B: If Mark's IRR is computed as 14% should he accept or reject the investment Question #2 A new Xerox copier costing $400,000 has a life of 5 years with no salvage value. The facility will generate the following annual cash flows: Part A - Compute the payback period. Part B - What are the disadvantages of using the payback period to analyze this investment? Home Insert Draw Page Layout Formulas Data Review View \& Tell me Description Years Cach Flow Discount fate Premi value \begin{tabular}{|l|l|} \hline 3 & \\ \hline 3 & \\ \hline 6 & \\ \hline 7 & \\ \hline 8 & \\ \hline 9 & \\ \hline 10 & \\ 11 & \\ \hline 12 & \\ \hline 13 & \\ \hline 14 & \\ 13 & \\ \hline 16 & \\ \hline 37 & \\ \hline 18 & \\ \hline 15 & \\ \hline 20 & PART \\ \hline 21 & \end{tabular} \begin{tabular}{|l|l} \hline 20 & PARTS \\ \hline 21 & \\ \hline 22 & \\ 23 & \\ 24 & \\ 25 & \\ 26 & \\ \hline 27 & Quention 12 \\ \hline 21 & PAntA \end{tabular} 20 manta 30 nicinsom in vir caanfow ivicieh faw