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6You are a 50/50 partner in a BBQ restaurant. Your business partner, who majored in English Literature, wants to invest in a new, larger, more efficient smoker. Including delivery, the new smoker costs $19,000 (paid today, year 0). According to your partners calculations, the new smoker would generate annual cash savings, including labor, raw materials, and tax savings due to depreciation of $6,000/year for the next 5 years (starting in year 1). In his words, This new BBQ smoker will save us $30,000 over five years, and only costs us $19,000! Thats $11,000 in profit! Obviously, since youre taking FINA 363, you recognized his flawed logic. However, you still need to run the numbers. What is the NPV of the new smoker? The applicable discount rate is 15%. a. S-1,591.38 b. $-134.62 c. $ +1,112.93 d. +1,760.78

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