Drew owns and operates an onion packing plant. To help reduce costs on labor and to increase efficiency, Drew is considering purchasing an automatic 50 lb. bagging machine and a machine that automatically stacks the 50 lb. bags onto pallets. The cost of the two machines combined and their installation is $300,000. Drew will make a 20% down payment and finance the rest of the machinery with an amortized loan over 15 years at a 5.5% interest rate. Drew predicts that by using these two machines, his plant will be able to increase output, therefore increasing operating receipts by $30,000 per year. Also, this machinery will save him approximately $10,000 in labor costs each year by the increase in efficiency. However, other operating expenses such as electricity and insurance will increase by approximately $5,000 per year. Drew assumed a straight-line depreciation over 15 years and the life of the investment is 7 years. The real terminal value is $180,000 after the 7 years, and Drew requires a pretax 10% rate of return to capital. The marginal tax rate over the 10 years is 25%, the rate of inflation is 3% and the risk premium is 1%. What is the nominal pre-tax terminal value? a.$180,000 b.$221,377.30 c.$206,032.97 d.$205,439.68 a.6.41% b.10% c.8.25% d.7.5% What is the after-tax, risk adjusted discount rate? a.$5,000 b.$7,142.86 c.$8,333.33 d.$1,666.67 a $180,000 b.$205,439.68 c.$216,032.97 d.$221,377.30 a.$30,430.94 b.$35,000 c.$31,343.87 d.$28,684.08 a.($4,541.74) b.$4,541.74 c.($19,071.16) d.$19,071.16 What are the tax savings from depreciation? What is the after-tax terminal value? What is the nominal after-tax net return in year 6? What is the net present value?