1. You discover the engine-oil additive your scientists developed three years ago makes a great men's after- shave once diluted properly using certain chemicals. How should you treat the original $125,000 of R&D expenditures that went into developing the engine-oil additive for your present decision regarding whether or not to begin production of the after-shave?
2. Consider a $50,000 machine that will reduce pretax operating costs by $15,000 per year over a 5-year period. Assume no changes in net working capital and a salvage value of zero. Further assume straight-line depreciation to zero, a marginal tax rate of 35%, and a required return of 10%. The project NPV is: