Xenon Document services needs to buy printers for their new store. They are choosing between two printer models. HP DeskJet model cost $325 to purchase, result in electricity bills of $155 per year, and last for 5 years. Epson Inkjet model cost $525, result in electricity bills of $110 per year, and last for 8 years. The discount rate is 21%.

a. What is the equivalent annual cost of the HP DeskJet model?

b. Which model is more cost-effective? HP DeskJet model OR Epson Inkjet

2.A company is considering the purchase of new equipment that will cost $30 000. For tax purposes the company is permitted to depreciate the equipments cost over a 5-year period using the straight-line method. However, the company expects to dispose of the equipment after only 4 years for an amount equal to an estimated salvage value of $4000. If the relevant tax rate is 30 per cent, calculate the net cash flows expected to occur because of the Year 4 disposal.

3.SonoMa Inc. is considering adding a new product and have given you the responsibility to evaluate the project. The project requires an initial investment of $90,000 in new machinery and is estimated to generate sales revenue of $120,000 per year for three years. Manufacturing costs are estimayed to be at 60 percent of revenues. The machinery will be depreciated straight line to zero-book value over three years. The project will also require $10,000 of net working capital at the beginning which will be recouped when the project ends. The corporate tax rate is 21 percent and required rate of return is 16.5 percent. Assume that the asset can sell for $10,000 at the end of the project. Calculate the NPV of the project.