1. QUESTIONS 1 - 3 GO WITH THE FOLLOWING PROBLEM:

1. Builtrite has estimated their cost of capital is 14% and they are considering the purchase of a machine with the following capital budget:Initial Investment$62,000RATFCF Year 1. $22,000 RATFCF Year 2. $30,000 RATFCF Year 3$38,000.

1. What is the machine's NPV?

A. $5,783

B. $4,824

C. $5,442

D. $6,014

QUESTION 2

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

1. 1.28
2. 1.06
3. 1.19
4. 1.10

QUESTION 3

What is the Internal Rate of Return of this machine?

1. 20.19%
2. 19.81%
3. 19.19%
4. 20.81%

QUESTION 4

QUESTIONS 4 - 5 GO WITH THE FOLLOWING INFORMATION:

1. Builtriteis considering purchasing a new machine that would cost $60,000 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 $15,000.The machine would increase EBDT by $42,000 annually.Builtrite'smarginal tax rate is 34%.

What the RATFCF's associated with the purchase of this machine?

1. $30,780
2. $31,800
3. $33,520
4. $27,840

QUESTION 5

Builtriteis considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over itsfive yearlife.At the end of fiveyearsit is believed that the machine could be sold for $15,000.The machine would increase EBDT by $42,000 annually.Builtrite'smarginal tax rate is 34%.

What is the TCF associated with the purchase of this machine?

1. $9,900
2. $7,500
3. $0
4. $5,100