Question 9 (4 points) Listen Kennesaw Corp, is analyzing the purchase of a cost saving equipment. The equipment is expected to reduce energy expenses by $370,000 before tax per year, and it is expected to have a salvage value of $95,000 after four-years. This equipment will be used for four years and depreciated using the five-year MACRS using the rates in the below table. The equipment will cost $630,000 to purchase and will require an additional $70,000 for installation costs. In analyzing the feasibility of the investment, the CEO ordered a series of tests to determine whether the proposed equipment will realize the required costs savings or not for a total cost of $12,000. The cost of capital for this investment is estimated at 15% and the project is expected to increase net working capital by $55,000 at the beginning of the project. The marginal tax rate for this project is 35%. Year 2 3 15 6 MACRS 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% The terminal cash flow for this project is: 1) $108,663 2) $123,095 3) $145,652 04) $159,086 Question 10 (4 points) Listen In capital budgeting, when a positive cash flow is forfeited after a particular investment is accepted, it is called: O 1) a side effect 2) an opportunity cost 3) a sunk cost 4) erosion