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Q1 - Jim Bingham is considering starting a small catering business. He would need to purchase a delivery van and various equipment costing $150,000 to equip the business and another $60,000 for inventories and other working capital needs. Rent for the building used by the business will . be $30,000 per year. Jim's marketing studies indicate that the annual cash inflow from the business will amount to $125,000. In addition to the building rent, annual cash outflow for operating costs will amount to $50,000. Jim wants to operate the catering business for only five years. He estimates that the equipment could be sold at that time for 10% of its original cost. The working capital will be fully released for other purposes at the end of the six years. Jim uses a. 14% discount rate. Required: Would you advise Jim to make this investment? Q2 Trimaine and Marjorie Manufacturing is considering the replacement of some old machinery with new machinery due to technology advancement that should save them $16,000 in net cash operating costs. The estimated life of the new equipment is 8 years and it will cost $50,000. What is the payback period? - Q3 City Towing is considering the purchase of a new tow truck. The garage currently has no tow truck, and the $100,000 price tag for a new truck would be a major expenditure. The expected useful life is 7 years. The owner of the garage has compiled the following estimates in trying toditermine whether the tow truck should be purchased: Compute the truck's internal rate of return to the nearest whole percent

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