1.

A company is considering the purchase of new equipment for $96,000. The projected annual net cash flows are $37,700. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 8% return on investment. The present value of an annuity of $1 for various periods follows:

Period	Present value of an annuity of $1 at 8%
1	0.9259
2	1.7833
3	2.5771

What is the net present value of this machine assuming all cash flows occur at year-end?

2.

The following present value factors are provided for use in this problem.

Periods	Present Value of $1 at 8%			Present Value of an Annuity of $1 at 8%
1		0.9259			0.9259
2		0.8573			1.7833
3		0.7938			2.5771
4		0.7350			3.3121

Cliff Co. wants to purchase a machine for $48,000, but needs to earn a return of 8%. The expected year-end net cash flows are $17,000 in each of the first three years, and $21,000 in the fourth year. What is the machine's net present value?

3.A company is considering the purchase of a new machine for $54,000. Management predicts that the machine can produce sales of $16,600 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $7,400 per year including depreciation of $4,600 per year. Income tax expense is $3,680 per year based on a tax rate of 40%. What is the payback period for the new machine?