5. You want to buy a new Computer Aided Design (CAD) system for your business. The cost of the system is $150,000 and you expect to save over $40,000 per year in reduced labor costs. Please calculate the net present value of the CAD if your required return is 10 percent and the life of the system is expected to be 5 years. (10 points)
6. Your company is considering converting its heating system in the main office from coal to heating oil. The initial cost of removing the coal fired furnace and installing an new oil fired unit is $60,000. The life of the analysis is 7 years. In the past you spent $25,000 per year on coal. The new company says you will spend no more than $15,000 per year on heating oil. If your required return is 12 percent, should you make this investment? Please calculate the net present value of this project. (10 points)
7. You have collected the following information:
a. the yield on your company’s preferred stock 8% b. the yield on your company’s debt 10% c. the required return on your company’s common stock and internal equity 12% d. debt total $5,000,000 e. preferred stock current market value $10,000,000