Eric is buying salad and pizza for a company lunch. Suppose that a bowl of salad costs $5.00, and a slice of pizza costs $3.00. Let e be the amount in dollars that eric spends on salad and pizza. If eric buys s bowls of salad and p slices of pizza, then the total amount of money he spends ( e. Can be represented by the equation . Now rearrange the equation you wrote above so that p is written in terms of e and s . The quantity of pizza he buys can be represented by the equation . Suppose eric has $30.00 to spend on salad and pizza; that is, e=$30.00 .

Shrieves casting company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by sidney johnson, a recently graduated mba. the production line would be set up in unused space in the main plant. the machinery’s invoice price would be approximately $200,000, another $10,000 in shipping charges would be required, and it would cost an additional $30,000 to install the equipment. the machinery has an economic life of 4 years, and shrieves has obtained a special tax ruling that places the equipment in the macrs 3-year class. the machinery is expected to have a salvage value of $25,000 after 4 years of use. the new line would generate incremental sales of 1,250 units per year for 4 years at an incremental cost of $100 per unit in the first year, excluding depreciation. each unit can be sold for $200 in the first year. the sales price and cost are both expected to increase by 3% per year due to inflation. further, to handle the new line, the firm’s net working capital would have to increase by an amount equal to 12% of sales revenues. the firm’s tax rate is 40%, and its overall weighted average cost of capital, which is the risk-adjusted cost of capital for an average project (r), is 10%. define “incremental cash flow.” (1) should you subtract interest expense or dividends when calculating project cash flow?