A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. The corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the balance, to be repaid in two equal end-of-year $16,134.15 payments. The interest payment in Year 1 is $1500. The projections are based on current economic conditions without consideration of price or cost escalations. Nevertheless, a general inflation rate of 4% is expected, and it is anticipated that all future costs and revenues will react to this inflation. Determine the before-tax CF (retained earnings only, in constant dollars) for Year 1 (only).

Liberty Airways is considering an investment of$800,000 in ticket purchasing kiosks at selected airports.The kiosks (hardware and software) have an expectedlife of four years. Extra ticket sales are expected to be60,000 per year at a discount price of $40 per ticket.Fixed costs, excluding depreciation of the equipment,are $400,000 per year, and variable costs are $24 perticket. The kiosks will be depreciated over four years,using the SL method with a zero salvage value. Theonetime commitment of working capital is expected tobe 1/12 of annual sales dollars. The after-tax MARR is15% per year, and the company pays income tax at therate of 34%. What’s the after-tax PW of this proposedinvestment? Should the investment be made?

You are considering the purchase of a new high-efficiency machine to replace older machines now. The new machine can replace four of the older machines, each with a current market value of $600. The new machine will cost $5000 and will save the equivalent of 10,000 kWh of electricity per year. After a period of 10 years, neither option (new or old) will have any market value. If you use a before-tax MARR of 25% and pay $0.075 per kilowatt-hour, would you replace the old machines today with the new one?A professor of engineering economics owns an older car. In the past 12 months, he has paid $2000 to replace the transmission, bought two new tires for $160, and installed a music system for $110. He wants to keep the car for 2 more years because he invested money 3 years ago in a 5-year certificate of deposit, which is earmarked to pay for his dream machine, a red European sports car. Today the old car’s engine failed.

A hospital in NYC area bought a diagnostic machine at a cost of $40,000. Maintenance cost is expected to remain constant throughout the life of this machine at $2,000 per year. The salvage value is estimated to be “0” at the end of the useful life of 10 years. Determine the economic life of this machine. MARR = 10% A. 5 years B. 1 year C. 10 years D. 7 years