Question: **Please Complete in Excel & SHOW FORMULA'S** John's Corporation is planning to buy a machine that will cost $40,000 and depreciate it on a straight-line

**Please Complete in Excel & SHOW FORMULA'S**

John's Corporation is planning to buy a machine that will cost $40,000 and depreciate it on a straight-line basis over a 5-year period with no residual value. The tax rate of John's is 30%, and the proper discount rate is 15%. The earnings before taxes from the machine are uncertain, but their expected value is $15,000 a year, with a standard deviation of $3,000.

1) Find the break-even earnings before tax.

2) Calculate the probability that the machine will be a profitable investment. Adams requires the probability of being profitable to be more than 60% to buy the machine. Based on your calculation, should Adams buy the machine?

**Please Complete in Excel & SHOW FORMULA'S**

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