Q1. In capital budgeting, should the following be ignored, or rather added or subtracted from the new machine's purchase price when estimating initial cash outflow? When estimating the machine's depreciable basis?

a) The market value of the old machine is $500, the old machine has a remaining useful life, and the investment is a replacement decision.

b) An additional investment in inventory of $2,000 is required.

c) $200 is required to ship the new machine to the plant site.

d) A concrete foundation for the new machine will cost $250.

e)Training of the machine operator will cost $300

Q2. 5 Breakeven analysis Barry Carter is considering opening a record store. He wants to estimate the number of CDs he must sell to break even. The CDs will be sold for$13.98 each, variable operating costs are $10.48 per CD, and annual fixed operating costs are $73,500.

a)Find the operating breakeven point in number of CDs.

b)Calculate the total operating costs at the breakeven volume found in part a.

c)If Barry estimates that at a minimum he can sell 2,000 CDs per month, should he go into the record business?

d)How much EBIT will Barry realize if he sells the minimum 2,000 CDs per month noted in part c?

Q3.Bond valuation Lahey Industries has outstanding a $1,000 par-value bond with an 8% coupon interest rate. The bond has 12 years remaining to its matu- rity date.

a. If interest is paid annually, find the value of the bond when the required return is (1) 7%, (2) 8%, and (3) 10%?

b. Indicate for each case in part a whether the bond is selling at a discount, at a premium, or at its par value.

c. Using the 10% required return, find the bond's value when interest is paid semiannually.