1. A company is considering purchasing a machine that costs $360000 and is estimated to have no salvage value at the end of its 8-year useful life. If the machine is purchased, annual revenues are expected to be $130000 and annual operating expenses exclusive of depreciation expense are expected to be $44000. The straight-line method of depreciation would be used. The cash payback period on the machine is

5.2 years.

2.7 years.

4.2 years.

8.0 years.

2. Wildhorse is contemplating a capital project costing $40806. The project will provide annual cost savings of $15200 for 3 years and have a salvage value of $4000. The companys required rate of return is 10%. The company uses straight-line depreciation.

	Present Value	PV of an Annuity
Year	of 1 at 10%	of 1 at 10%
1	.909	.909
2	.826	1.736
3	.751	2.487

This project is

acceptable because it has zero NPV.

acceptable because it has a positive NPV.

unacceptable because it has a negative NPV.

unacceptable because it earns a rate less than 10%.