Analysis of benetits of acquisition of long-term assets. (Adapted Ironi a problem by S. Zeff.) Lexie T. Colleton is the chic! financial officer of Ragazze, and one of her duties is to give advice on investment projects. Today's date is December 31, Year 0.

Colleton requires that, to be acceptable, new investments must provide a positive net present value after discounting cash flows at 12 percent per year.
A proposed investment is the purchase of an automatic gonculator, which involves an initial cash disbursement on December 31, Year 0. The useful life of the machine is nine years, through Year 9. Colleton expects to be able to sell the machine for cash of $30,000 on December 3 1 , Year 9. She expects commercial production to begin on December 31, Year 1. Ragazze will depreciate the machine on a straight-line basis.
Ignore income taxes.
During Year 1, the break-in year, Ragazze will perform test runs in order to put the machine in proper working order. Colleton expects that the total cash outlay for this purpose will be $20,000, incurred at the end of Year 1.
Colleton expects that the cash disbursements for regular maintenance will be $60,000 at the end of each of Years 2 through 5. inclusive, and $100,000 at the end of each of Years 6 through 8, inclusive.
Colleton expects the cash receipts (net of all other operating expenses) from the sale of the product that the machine produces to be $130,000 at the end of each year from Year 2 through Year 9, inclusive.

a. What is the maximum price that Ragazze can pay for the automatic gonculator on December 31, Year 0, and still earn a positive net present value of cash flows'?

b. Independent of your answer to part

a, assume the purchase price is $250,000, which Ragazze will pay with an installment note requiring four equal annual installments starting December 31, Year 1, and an implicit interest rate of 10 percent per year. What is the amount of each payment?(Appendix)