At a cash cost of \($330,000,\) Monona, Inc., can acquire equipment that will save \($100,000\) in annual cash operating expenses.

No salvage value is expected at the end of its five-year useful life. Assume the machine will be depreciated over five years on a straight-line basis on both the books and the tax return. The income tax rate is 30% and Monona has a 10% cutoff rate when using a net present value analysis.

Required

a. What are the annual after-tax cash savings in operating expenses?

b. What are the annual tax savings from the depreciation tax shield?

c. Compute the cash payback period.

d. Compute the average rate of return.

e. Compute the net present value and indicate whether it is positive or negative (round amounts to nearest dollar).

f. Compute the excess present value index.