Madeleiene has been operating a restaurant and caf$$ in an old building downtown. Because of her caf$$s popularity and the caf$$s old kitchen, she has had trouble keeping up with demand for her famous croissants. Due to the success of her business, Madeleine has been approved for a loan of $$60,000$ to cover the cost of a new oven, walk$-$in freezer, industrial refrigerator, and industrial coffee machine. The new kitchen appliances will drastically lower her operating costs and will raise receipts by making the caf$$ more efficient. Consequently, real net returns will increase by $$14,000$ per year. Madeleine has assumed an investment life of $5$ years, straight$-$line depreciation of $8$ years, an inflation rate of $2\mathrm{.}5\%,$ a risk premium of $2\%,$ a required rate of return of $12\%,$ a marginal tax rate of $24\%$ and a real terminal value of $$30,000.$

What is the nominal pre$-$tax terminal value?

a$.$$$30,000$

b$.$$$34,778\mathrm{.}22$

c$.$$$60,000$

d$.$$$33,942\mathrm{.}25$

What is the after$-$tax, risk adjusted discount rate?

a$\mathrm{.}12\%$

b$\mathrm{.}9\mathrm{.}12\%$

c$\mathrm{.}10\mathrm{.}64\%$

d$\mathrm{.}7\mathrm{.}94\%$

What is the accumulated depreciation after $5$ years?

a$.$$$60,000$

b$.$$$30,000$

c$.$$$37,500$

d$.$$$40,000$

What are the tax savings from depreciation?

a$.$$$1,428\mathrm{.}57$

b$.$$$7,142\mathrm{.}86$

c$.$$$7,500$

d$.$$$1,800$

What is the after$-$tax terminal value?

a$.$$$30,000$

b$.$$$30,679\mathrm{.}72$

c$.$$$31,196\mathrm{.}11$

d$.$$$32,893\mathrm{.}52$

What is the nominal after$-$tax net return in year $4?$

a$.$$$11,364\mathrm{.}36$

b$.$$$13,000$

c$.$$$11,033\mathrm{.}36$

d$.$$$11,744\mathrm{.}57$

What is the net present value?

a$.$$$16,985\mathrm{.}54$

b$.$$$21,701\mathrm{.}61$

c$.$$$8,077\mathrm{.}89$

d$.$$$19,071\mathrm{.}16$