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EPP: Calculate a capacity alternative

Question 45: A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years. If the cost of capital is 5 percent, the net present value of this investment is:

a) greater than $130,000
b) greater than $80,000
c) impossible to calculate, because no interest rate is given
d) less than $30,000
e) impossible to calculate, because variable costs are not known

Question 49: An item's holding cost is 60 cents per week. Each setup costs $120. Lead time is 2 weeks. EPP is:

b) 60
c) 72
d) 100
e) 200

Please select the right answer and provide explanation as to how you have calculated it.