1. The landlord must calculate how much the tenant must pay in a way that guarantees the minimum expected profit. Assume

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1. The landlord must calculate how much the tenant must pay in a
way that guarantees the minimum expected profit. Assume that the
landlord will require the tenant to pay in advance. Use the
following data to determine: (1) Net Cost to the lessor; (2) After
Tax Annual Payment; (3) Before Tax Annual Payment.
Asset Cost $10,000,000
Asset life 5 years
Discount rate or cost of capital 8.75%
Tax rate 35%
Linear depreciation
Residual value $0
2. The profitability index for a project whose initial
investment is $40,000 and receives cash flows of $15,000 annually
for 4 years at a cost of capital of 12% is:
3. Seattle Corporation has before it an equity investment
opportunity in which it generates the following cash flows: $30,000
for years 1 through 4, $35,000 for years 5 through 9, and $40,000
in year 10. This project has an initial investment of $150,000, and
the firm's weighted average cost of capital is 10%. What is the
payback period for this investment?