Next year, Disney is releasing another Avengers movie. The company is not confident in box office sales, but they do believe that the film will create merchandising opportunities (DVDs, toys, clothes, etc.). Their early analysis believes that the movie will have an NPV of -$10 million if you only look at ticket sales in the theater. However, they also believe that movie will create merchandise sales of $10 million per year over a 10-year period. Lets assume that the after-tax operating margin on these sales is 40%, and that Disney has a cost of capital of 10%.

When you add in the side effect, what is the NET NPV for the project?

Question 4 options:

	$8.43 million
	$7.41 million
	$14.58 million
	$26.87 million
	$11.51 million

A firm will purchase a new piece of equipment today for $225,000. The equipment will also cost an additional $25,000 for installation and delivery. The equipment will be depreciated using a 5-year MACRS depreciation schedule. What will be the book value of the equipment in exactly two years?

Question 1 options:

	$132,000
	$120,000
	$143,000
	$130,000
	$108,000