-A machine with a 5-year life has an initial cost of $20,000 and a $2,000 salvage value. The annual operating costs per year are $8,000. According to the classical straight line method, the depreciation in year 2 is closest to:

		$5,300
		$2,800
		$4,500
		$3,600 (explain why this is correct)

-A company produces a gear that is commonly used by several lawnmower manufacturing companies. The base cost of operation (rent, utilities, etc) is $750,000 per year. The cost of manufacturing is $1.35 per gear. If these gears are sold at $7.35 each, how many must be sold each year to break even?

		100,000 per year
		65,000 per year
		125,000 per year (explain why this is correct)
		90,000 per year

-Calculate the rate of return for an investment with the following characteristics.

Initial Cost	$20,000
Project Life	10 years
Salvage Value	$5,000
Annual Receipts	$7,500
Annual Expenses	$3,000

		24.5%
		19.6% (explain why this is correct)
		22.9%
		20.6%