The "Siberian hamsters", a new and upcoming rock band, is considering a new tour in Europe for 6 or 7 months. The band performs each month regularly at the "Plaza" club in Tel Aviv, for which it is paid $9,000 per month. Should the band start its tour, it will need to forgo these revenues and additionally pay the "Plaza" an immediate fine of $12,000, which is not deductible.

In order to start touring, the band will need to join a new drummer. The band members went yesterday to multiple concerts of other rock bands at a cost of $4,000. In one of these concerts, they discovered a talented drummer named Chad Ulrich, who was interested in joining the tour.

Chad demanded a monthly salary of $8,000, and also a new and advanced drum-set at a cost of $100,000. This drum-set will be depreciated over 4 months. At the end of the tour, you believe it can be sold for $40,000.

The expected revenues from the tour are $50,000 for the first month, and due to the success of the concerts, they would rise by 10% per month. The ongoing operating expenses (which include marketing, food, travel and accommodation) should amount to $20,000 per month. In addition, the band's manager requires increasing his monthly retainer from $3,000 to $4,000 for securing the tour.

At the end of the successful tour, the band plans to donate $5,000 from the tour's proceeds to SYH organization ("Save your hamster"). This donation is tax deductible.

During the preparation for the tour, the band discovered that its visa to Europe expires in only 6 months. If the bandchoosesto overstay its visa, it will need to pay a non-deductible fine of $130,000, as soon as the visa expires.

The band's operational tax rate is 30% and the Capital gain tax rate is 20%. The band is profitable and can deduct any expense as a tax shield (having monthly royalties of $100,000 from their previous album, "Radioactive Sawdust"). All cash flows are year-end, unless stated otherwise.

The tour'sannualdiscount rate is 40%.

Should the band go on tour?