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1. Instead of Going out on a job that pays $150000 per year, I decided to try my luck to produce valentine day cards.

1) Initial investment (t=0) in printing Machine worth $1,000,000.The machine is expected to last 10 years with no salvage value. Use a straight line depreciation method.

2) an artist friend has decided to donate $30000 worth of artwork for ach of the next 2 years (t=1,2). This will not be enough. So you plan to hire a fulltime artist , paying him $50000 per year(t=1.....10).

3) The idea is expected to catch up slowly and expect a revenues of $500000 in first five years (t=1..5)and then revenues jump to 1,000,000 per year for remaining five years (t=6....10).The material costs however will remain at $250,000 per each year (t=1...10)

4) Helping with the material costs, you have discovered some perfectly usable paper in your basement. Tis paper should reduce your costs by $25,000 per year for the first five years . (t=1..5) Alternatively if you don't use this paper, you could make sales of $25000 in each year of (t=1 to t=5)

5)You will need working capital of $45,000 during the first five years (t=1....5) Then you plan to keep a working capital of $55,000 for the rest of Projects life (year 6 onwards).

6)With part of your investment financed with debt, an interest expense of $35,000 per year is expected.

If the discount rate is 10% is appropriate for this project's cash flows. Should you undertake the project. The corporate tax rate is 35%.

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