1.value:

1.00 points

Compute the payback period for each of these two separate investments:

a.

A new operating system for an existing machine is expected to cost $260,000 and have a useful life of four years. The system yields an incremental after-tax income of $75,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. (Round your intermediate calculations to the nearest dollar amount and final answer to 2 decimal places.)

Payback period years

b.

A machine costs $190,000, has a $14,000 salvage value, is expected to last seven years, and will generate an after-tax income of $41,000 per year after straight-line depreciation. (Round your intermediate calculations to the nearest dollar amount and final answer to 2 decimal places.)

Payback period years

2.value:

1.00 points

A machine costs $700,000 and is expected to yield an after-tax net income of $30,000 each year. Management predicts this machine has a 11-year service life and a $140,000 salvage value, and it uses straight-line depreciation. Compute this machine’s accounting rate of return. (Round your answer to the nearest whole number. Omit the “%” sign in your response.)

Accounting rate of return %

3.value:

1.00 points

K2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $374,400 with a 7-year life and no salvage value. It will be depreciated on a straight-line basis. K2B Co. concludes that it must earn at least a 9% return on this investment. The company expects to sell 149,760 units of the equipment’s product each year. The expected annual income related to this equipment follows. (Use Table B.3)

Sales $ 234,000

Costs

Materials, labor, and overhead (except depreciation) 82,000

Depreciation on new equipment 53,486

Selling and administrative expenses 23,400

Total costs and expenses 158,886

Pretax income 75,114

Income taxes (20%) 15,023

Net income $ 60,091

Compute the net present value of this investment. (Round “PV Factor” to 4 decimal places. Round your intermediate calculations and final answer to the nearest dollar amount. Omit the “$” sign in your response.)

Net present value $