Will rate, thank you.

Part 1:

Air conditioning for a college dormitory will cost $3.3 million to install and $110,000 per year to operate. The system should last 17 years. The real cost of capital is 7%, and the college pays no taxes. What is the equivalent annual cost? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Equivalent annual cost $

Part 2:

($ thousands)
Period
	0	1	2	3	4	5	6	7
Net cash flow	14,500	1,674	3,137	6,513	10,724	10,175	5,947	3,459
Present value at 22%	14,500	1,372	2,108	3,587	4,841	3,765	1,804	860
Net present value =	1,091	(sum of PVs)

Restate the above net cash flows in real terms. Discount the restated cash flows at a real discount rate. Assume a 22% nominal rate and 8% expected inflation. NPV should be unchanged at +1,091, or $1,091,000. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in thousands rounded to the nearest whole number.)

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7
Net cash flows (real)
Net present value	$

Part 3:

Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $570,000. Of this sum, $67,000 is described by the supplier as an installation cost. Ms. Potts does not know whether the Internal Revenue Service (IRS) will permit the company to treat this cost as a tax-deductible current expense or as a capital investment. In the latter case, the company could depreciate the $67,000 using the five-year MACRS tax depreciation schedule.

Assume the tax rate is 40% and the opportunity cost of capital is 7%. Calculate the value of the tax shield if the kiln is currently expensed and if it is treated as a capital investment. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Tax shield if currently expensed	$
Tax shield if capital investment	$

Will rate, thank you.