QUIZ-Capital Budgeting
QUESTIONS 1 – 3 GO WITH THE FOLLOWING PROBLEM:Builtrite has estimated their cost of capital is 14% and they are considering the purchase of a machine with the following capital budget:Initial Investment $62,000RATFCF Year 1 $22,000RATFCF Year 2 $30,000RATFCF Year 3 $38,000Question 1What is the machine’s NPV?
A.$5783B.$6014C.$4824D.$5442
Question 2What is the Profitability Index (PI) of this machine?
Question 3What is the Internal Rate of Return of this machine?
QUESTIONS 4 – 5 GO WITH THE FOLLOWING INFORMATION:Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over its five-year life. At the end of five years it is believed that the machine could be sold for $15,000. The machine would increase EBDT by $42,000 annually.Builtrite’s marginal tax rate is 34%.Question 4What the RATFCF’s associated with the purchase of this machine?
A.$30780B.$31800C.$27840D.$33520

Question 5What is the TCF associated with the purchase of this machine?
A.$0B.$5100C.$9900D.$7500