Question 1

QUESTIONS 1 3 GO WITH THE FOLLOWING PROBLEM:

Builtrite has estimated their cost of capital is 15% and they are considering the

purchase of a machine with the following capital budget:

Initial Investment

$62,000

RATFCF Year 1

$22,000

RATFCF Year 2

$30,000

RATFCF Year 3

$38,000

What is the machines NPV?

Question 2

What is the Profitability Index (PI) of this machine?

Question 3 What is the Internal Rate of Return of this machine? Question 4 QUESTIONS 4 5 GO WITH THE FOLLOWING INFORMATION: Builtrite is considering purchasing a new machine that would cost $50,000 and the machine would be depreciated (straight line) down to $0 over its five year life. At the end of five years it is believed that the machine could be sold for $8,000. The machine would increase EBDT by $36,000 annually. Builtrites marginal tax rate is 34%. What the RATFCFs associated with the purchase of this machine? Question 5 What is the TCF associated with the purchase of this machine? \Quiz 7: Extra Credit Quiz Question 1 Which of the following business organization set-ups has the most potential liability for all owner(s)?