1) A company is considering investing in a new machine that requires a cash payment of $51,849 today. The machine will generate annual cash flows of $20,483 for the next three years.

QS 24-13 Internal rate of return LO P4

What is the internal rate of return if the company buys this machine? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

2)

Problem 24-1A Computation of payback period, accounting rate of return, and net present value LO P1, P2, P3

Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $760,000 cost with an expected four-year life and a $48,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round PV factor value to 4 decimal places.)

Expected annual sales of new product	$	2,540,000
Expected annual costs of new product
Direct materials		508,000
Direct labor		700,000
Overhead (excluding straight-line depreciation on new machine)		616,000
Selling and administrative expenses		188,000
Income taxes		30	%

Required: 1. Compute straight-line depreciation for each year of this new machines life. 2. Determine expected net income and net cash flow for each year of this machines life. 3. Compute this machines payback period, assuming that cash flows occur evenly throughout each year. 4. Compute this machines accounting rate of return, assuming that income is earned evenly throughout each year. 5. Compute the net present value for this machine using a discount rate of 4% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the assets life.)

3)

Exercise 24-1 Payback period computation; uneven cash flows LO P1

Beyer Company is considering the purchase of an asset for $370,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year.

	Year 1				Year 2				Year 3				Year 4				Year 5				Total
Net cash flows		$	86,000			$	49,000			$	70,000			$	300,000			$	12,000			$	517,000

Compute the payback period for this investme

4)

Exercise 24-6 Net present value LO P3

1. A new operating system for an existing machine is expected to cost $570,000 and have a useful life of six years. The system yields an incremental after-tax income of $260,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $29,400.
2. A machine costs $480,000, has a $34,100 salvage value, is expected to last eight years, and will generate an after-tax income of $82,000 per year after straight-line depreciation.

Assume the company requires a 12% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)