Roten Manufacturing Company is considering an investment on a machine for producing auto parts. The machine costs $250,000 today, will have a five-year life and will be depreciated over a five-year life on a straight-line basis toward a zero salvage value. The company paid a consulting company $7,000 last year to help them decide whether there is a sufficient demand for the auto parts. In addition to the investment on the machine, the company also invests $15,000 in net working capital. The company has estimated the performance of the new machine and believes the following are good estimates of the new asset: sales $140,000 per year, cost of goods sold (35% of sales) per year, and administrative expenses $15,000 per year. The company pays interest $20,000 annually on average, has a 10% cost of capital and a 30% tax rate. Answer Questions 1 - 8. Should Roten include consulting fee, $7,000, in estimating project's cash flows?

	a.	Yes
	b.	No

QUESTION 2

What is the project cash flow at Year 0?

	a.	-$265,000
	b.	-$15,000
	c.	-$250,000
	d.	-$203,000

QUESTION 3

What is the project cash flow at Year 5?

	a.	$83,200
	b.	$74,000
	c.	$68,200
	d.	$50,500

QUESTION 4

What is payback period for the project?

	a.	3.78 years
	b.	4.02 years
	c.	4.51 years
	d.	3.89 years

QUESTION 5

What is NPV for the project?

	a.	$2,845.48
	b.	-$31,469.12
	c.	$1,653.45
	d.	-$6,468.34

QUESTION 6

What is IRR for the project?

	a.	8.52%
	b.	10.41%
	c.	11.73%
	d.	9.04%

QUESTION 7

What is PI for the project?

	a.	0.94
	b.	1.89
	c.	0.98
	d.	1.01

QUESTION 8

Should Roten accept the project?