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A company is planning to purchase a machine that will cost $84,000, have a six-year life, and be depreciated using the straight-line method with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below.

Sales		$150,000
Costs:
Manufacturing	$67,000
Depreciation on machine	14,000
Selling and administrative expenses	45,000	(126,000)
Income before taxes		$ 24,000
Income tax (50%)		( 12,000)
Net income		$ 12,000

What is the payback period for this machine?

	7.00 years
	3.23 years
	3.50 years
	1.00 year
	14.00 years 6. A given project requires a $63,000 investment and is expected to generate end-of-period annual cash inflows as follows: Year 1 Year 2 Year 3 Total $25,200 $15,750 $22,050 $63,000 Assuming a discount rate of 11%, what is the net present value of this investment? Selected present value factors for a single sum are shown in the table below: i = 11% i = 11% i = 11% n = 1 n = 2 n = 3 0.90090 0.81162 0.73119 $51,609 $20,790 $45,405 ($42,210) ($11,391) 7. A company is planning to purchase a machine that will cost $36,000, have a six-year life, and be depreciated using the straight-line method with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. Sales $102,000 Costs: Manufacturing $55,000 Depreciation on machine 6,000 Selling and administrative expenses 33,000 (94,000) Income before taxes $ 8,000 Income tax (50%) ( 4,000) Net income $ 4,000 What is the accounting rate of return for this machine? 22.22% 4% 11.11% 33.30% 50.00%

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