Question 5 - Consider the following: The table below shows the cash flow associated with making a part in-house, using an outside vendor, or by using contract labor. One of these options must be chosen.

	In-House	Outside Vendor	Contract labor
First Cost $	43,000	2,000	0
Annual Cost $	5,000	200	2,000
Annual Income $	14,000	1,500	2,500
Salvage Value $	7,000	None	None
Life years	9	6	7

Using a study period of 6 years and an effective monthly rate of 1.09789%, what is the present worth of the in-house option?

Selected Answer: $14,050 incorrect

Question 6 - Consider the following: An investment opportunity is available to a small candle-making business. The cash flow is:

Year 0: $2,001

Year 1: -$499

Year 2: $100

Year 3: -$8,104

Year 4: $6,800

The companys financial analyst tells them to estimate the borrowing rate at 9% per year and the investment rate at 5% per year. What is the EROR per year using the ROIC method?

Selected Answer: 3.338% Incorrect