Use the following data to answer the next THREE questions:

Molly is considering opening a Campus Delivery business. The initial investment for the business is $200,000, which includes purchasing delivery vehicles and other investments. For tax purposes, the projected salvage value of the delivery vehicles is $62,000. The government requires depreciating the vehicles using the straight-line method over the businesss life of 5 years. Molly is trying to estimate the net cashflows after tax for this business. She has already figured out that the business will generate an annual after-tax cash inflow of $54,000 from the operation. She now needs your help to estimate the net cash inflow that she will receive from selling the delivery vehicles at the end of 5 years.

1. In the best-case scenario, Molly can sell the vehicles at the end of 5 years for $89,000. Assuming the tax rate of 25%, what is the net after-tax cashflow Molly will receive from selling her delivery vehicles at the end of 5 years? multiple choice 1

$6,750

$55,250

$82,250

$89,000

$95,750

1. In the worst-case scenario, Molly can sell the vehicles at the end of 5 years for $35,000. Assuming the tax rate of 25%, what is the net after-tax cashflow Molly will receive from selling her delivery vehicles at the end of 5 years? multiple choice 2

$28,250

$6,750

$35,000

$68,750

$41,750

1. Molly is very optimistic about the sale of the delivery vehicles, and thinks that the best-case scenario of selling them for $89,000 will happen. Under this assumption, what is the Internal Rate of Return (IRR) for Mollys delivery business? multiple choice 3

19.99%

11.7%

19.46%

16.6%

18.92%