Question 1: George William buys a machine for his business. The machine costs $150,000. George estimates that the machine can produce $40,000 cash inflow per year for the next 5 years. George's cost of capital is 10%. What is the approximate net present value?
A. $1,632.
B. $16,796.
C. $24,212.
D. $31,632.
Question 2: Anna Taylor buys a machine for her business. The machine costs $150,000. Anna estimates that the machine can produce $40,000 cash inflow per year for the next 5 years. Her cost of capital is 12%. Based upon the net present value of this investment, Anna should:
A. invest in the machine.
B. invest in the machine if she can get a higher cost of capital.
C. not invest in the machine.
D. cannot tell without additional information
Question 3: What are prime mortgages? What are near prime mortgages (Alt A)? What are subprime loans?