Please set-up solution model for the following capital budget problem. Explain the approach you plan to take and why. Perform the calculations of your model and draw conclusions.

Estimated data:

• can borrow funds from the banck rate=3%
• Cost to install equipment=$105,000
• Gross revenues:

Year Cash inflows Outcashs

1 25,000 13,000

2 27,000 12,000

3 27,000 12,000

4 27,000 12,000

5 23,000 10,000