You are thinking about opening a small printing shop. For that you will need to buy a high-quality printing equipment. After extensive research you are considering acquiring an equipment that costs $50,000 and has an economic life of 5 (Five) years. It will be fully depreciated by the straight-line method over its economic life. After 5 (five) years this equipment will be scrapped as it can't be sold. You are not expecting to continue with the printing business beyond 5 years. In addition, you have estimated that your printing business will require initial investment in net working capital (NWC) of $1,500 before any activity can be started. The required amount of NWC during the life of the business is estimated to be equal to 5% of annual sales figure. The NWC will be fully released at the end of 5 years. This equipment will produce 100,000 high-quality prints per year, with each costing on average $0.1 to make. An average price for each print is estimated to be $0.30 = you expect to charge the customer for each print on average $0.30). Fixed costs are $4,000 per year. Assume that the discount rate is 15 percent, the tax rate is 30 percent and that all units produced during the year can be sold in that year. a Should you make the purchase of this high-quality printing equipment? Provide necessary calculations and briefly comment. (Note: NPV calculations are required for this part). (7 points) b. Calculate the accounting break-even point. What does the accounting break-even tell us? (3 points) c. Now assume that at the end of 5 (five) years you can sell the equipment for $15,000. All other information is the same as above. In this case, will you go ahead and buy the high-quality printing equipment and start the business? Provide necessary calculations and briefly comment. (Note: calculation of the NPV is required for this part.) (2 points) d. Imagine that 2 (two years ago you incurred costs of $5,000 on research to see if your printing business is viable. Would your answer to question c) change given this piece of information? Explain. Note: No calculations required for this part. Only explanation. (1.34 points) You are thinking about opening a small printing shop. For that you will need to buy a high-quality printing equipment. After extensive research you are considering acquiring an equipment that costs $50,000 and has an economic life of 5 (Five) years. It will be fully depreciated by the straight-line method over its economic life. After 5 (five) years this equipment will be scrapped as it can't be sold. You are not expecting to continue with the printing business beyond 5 years. In addition, you have estimated that your printing business will require initial investment in net working capital (NWC) of $1,500 before any activity can be started. The required amount of NWC during the life of the business is estimated to be equal to 5% of annual sales figure. The NWC will be fully released at the end of 5 years. This equipment will produce 100,000 high-quality prints per year, with each costing on average $0.1 to make. An average price for each print is estimated to be $0.30 = you expect to charge the customer for each print on average $0.30). Fixed costs are $4,000 per year. Assume that the discount rate is 15 percent, the tax rate is 30 percent and that all units produced during the year can be sold in that year. a Should you make the purchase of this high-quality printing equipment? Provide necessary calculations and briefly comment. (Note: NPV calculations are required for this part). (7 points) b. Calculate the accounting break-even point. What does the accounting break-even tell us? (3 points) c. Now assume that at the end of 5 (five) years you can sell the equipment for $15,000. All other information is the same as above. In this case, will you go ahead and buy the high-quality printing equipment and start the business? Provide necessary calculations and briefly comment. (Note: calculation of the NPV is required for this part.) (2 points) d. Imagine that 2 (two years ago you incurred costs of $5,000 on research to see if your printing business is viable. Would your answer to question c) change given this piece of information? Explain. Note: No calculations required for this part. Only explanation. (1.34 points)