Newco is looking at expanding its business to include BitcoinMining, and change their name to BitCo. They will need to purchase

$2,000,000 worth of mining machines. It is estimated that these machines will generate $2,000 in revenue per day. The machines will require 15 days of maintenance per year, during which time they will not produce any revenue. Newco estimates that the machines will cost $200 per day of operation. BitCo also has to pay a commission of 1 penny per dollar of revenue. BitCo has a 5.0% cost of capital and a 25% tax rate. The machines can be sold for 25% of the original cost after 5 years. The machines will be depreciated using straight-line depreciaton over 5 years.

Tax Rate25.0%Cost of Capital5.0%Annual Depreciation400,000Operating Days / Year350

Years >>012345Capex?RevenueMining Revenue ?????Total Revenue? ? ? ? ?

Expenses

Fixed ?????Variable ?????Depreciation ?????Income ????? Taxes? ? ? ? ? Net Income? ? ? ? ? Net Cash Flow??????

Salvage Value

?

Net Cash Flows??????Cumulative Net Cash Flow??????Discounted Cash Flow??????Cumulative DCF??????

7What is the project's NPV? Response A. $250,079 B. $847,659 C. $321,654

8What is the project's IRR? Response A. 7.5% B. 17.8% C. 10.0%

9How much longer is the discounted payback period than the net payback period? Response A. 0.61years B. 1.20 years C. 0.45 years

10What is the project's Profitability Index? Response A. 1.42 B. 1.27 C. 1.32