Question
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:
Period  Present value of an annuity of $1 at 8% 
1  0.9259 
2  1.7833 
3  2.5771 
What is the net present value of this machine assuming all cash flows occur at yearend?
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.
Periods  Present Value of $1 at 8%  Present Value of an Annuity of $1 at 8%  
1  0.9259  0.9259  
2  0.8573  1.7833  
3  0.7938  2.5771  
4  0.7350  3.3121  
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 yearend 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.