Question: Galen Mining requires a digging machine that costs TZS 50,000,000. It will depreciate the machine uniformly over its life of 5 years. The tax rate

Galen Mining requires a digging machine that costs TZS 50,000,000. It will depreciate the machine uniformly over its life of 5 years. The tax rate of Galen is 35% and the proper discount rate is 11%. Because of the uncertain price of the ore, the expected pre-tax revenue (excluding depreciation) from the machine is TZS 15,000,000 annually, with a standard deviation of TZS 3,000,000.

a. Calculate the level of pre-tax revenue (excluding depreciation) enough to break even?

b. What is the probability that the machine will prove to be profitable?

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