1) A company is considering the purchase of new equipment for $90,000. The projected annual net...

1)

A company is considering the purchase of new equipment for $90,000. The projected annual net cash flows are $35,500. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 8% return on investment. The present value of an annuity of $1 for various periods follows:
    

   
What is the net present value of this machine assuming all cash flows occur at year-end?

Multiple Choice

• $30,000

• $4,500

• $1,487

• $34,500

• $88,910

2)

The following present value factors are provided for use in this problem.

Xavier Co. wants to purchase a machine for $36,900 with a four year life and a $1,200 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are $11,900 in each of the four years. What is the machine's net present value?

Multiple Choice

• $3,396.

• $2,514.

• $40,296.

• $(3,396).

• $(2,514).

3)

A company is considering the purchase of a new machine for $57,000. Management predicts that the machine can produce sales of $16,900 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $7,100 per year including depreciation of $4,900 per year. Income tax expense is $3,920 per year based on a tax rate of 40%. What is the payback period for the new machine?

Multiple Choice

• 3.37 years.

• 6.40 years.

• 5.29 years.

• 11.63 years.