1. Calculate the BEP for the following project (include your calculation steps). The project outcome becomes operational at the end of third year.
- Project cost: $120,000, paid at the start of year zero (beginning of the project)
- Operation and maintenance costs: $5,000 annually, after the project is operational
- Revenue: $45,000 annually, after the project is operational
2. In a four-year project starting next week, all of project’s costs are paid at the end of each year, and are expected to be $500,000 each year. What is the NPV of the total cost of this project if we could assume the interest rate is and will remain 10% in this four-year period?