Runtan Inc. has just paid an annual dividend of $0.45 per share. Analysts expect the firm's dividends to grow by 6% forever. Its stock price is $34.9 and its beta is 0.6. The risk-free rate is 2% and the expected return on the market portfolio is 8%. What is the best guess for the cost of equity?

The local franchise of Jiffy Lube is thinking of buying a new lift for $70,000 that would make it easier to access the oil filter in customers' cars and save labor. The savings would increase over the project's 3-year life, in line with the projected growth of the business:

	A	B	C	D
1	Year	1	2	3
2	Cost savings	60,000	66,000	79,200

The machine is to be linearly depreciated to zero and will have no resale value after 3 years. The company uses a discount rate of 15% and has a tax rate of 21%. What is the free cash flow in year 3? What is the NPV?