1. How long will it take to recover an investment of a $245,000 CNC machine model that could generate an income of $92,000 per year, with maintenance expenses of $38,000 per year and no salvage value? Use MARR values of (a) 0% and (b) 10%.

2. Acetate, Inc., has equity with a market value of $22.5 million and debt with a market value of $6.75 million. The cost of debt is 9 percent per year. Treasury bills that mature in one year yield 5 percent per year, and the expected return on the market portfolio is 12 percent. The beta of Acetate’s equity is 1.1. The firm pays no taxes.