QUESTION 6 Coors Corporation has just purchased a $570,000 machine to produce gadgets The machine will be fully depreciated by the straight line method over is so year economic life. Each gadget sells for $40. The variable cost per cadaet is $14, and the firm incurs fixed costs of $300,000 each year. The corporate tax rate for the company is 25% The appropriate discount rate is 10% What is the financial break even point for the projecte, the quantity for financial break-even? 16,758 units 16,831 units 16,913 units 17,032 units 17,125 units QUESTION 7 You are considering a project that has been assigned a discount rate of 8 percent If you start the project today (t=0), you will incur an initial cost of $960 and will receive cash inflows of $470 a year for three years (starting from year 1). If you wait one year to start the project, the initial cost will rise to $1.000 (att1 and the cash flows will increase to $510 a year for three years (starting from yeart-2). Should you wait one year to start the project? (Hint calculate and compare the NPV of the project if it is started today vs started one year from today) No, because NPV is lower by $4123 No, because NPV is lower by $29.38 Yes, because NPV is higher by $44.70 Yes, because NPV is higher by $39 80 Yes, because NPV is higher by $21.95 QUESTION 8 Innovation Hub has developed a new smart watch. If the watch is successful, the present value of the payoff (at the time the product is brought to market) is $33 million. If the equipment fails, the present value of the payoff is $7 million. If the watch goes directly to market, there is a 50 percent chance of success Alternatively, Innovation Hub can delay the launch by one year and spend $2.5 million to test market the watch. Test-marketing would allow the firm to improve the watch and increase the probability of success to 75%. The appropriate discount rate is 10%. Should the firm conduct test marketing No, because NPV is lower by $1.22 million No, because NPV is lower by $1.41 million Yes, because NPV is higher by $1.36 million D. Yes, because NPV is higher by $1.47 million E. Yes, because NPV is higher by $1.59 million