1. NPV - Arch, Inc., would like to purchase a blueprint machine for $50,000. The machine is expected to have a life of 4 years, and a salvage value of $10,000. Annual maintenance costs will total $14,000. Annual savings are predicted to be $30,000 in year 1, $37,000 in year 2, $35,000 in year 3, and $32,000 in year 4 . The companys required rate of return is 11%.

a. Find the net present value of this investment & determine the payback period

b. Should the Arch purchase the machine? Explain, using one qualitative factor that may affect the decision.

2. Conway Corp wants to purchase a fleet of trucks costing $260,000. Additional equipment needed to maintain the trucks will be purchased at the end of year 2 for $40,000. The trucks are expected to have a life of 8 years, and a salvage value of $20,000. Annual costs for maintenance, insurance, and other expenses will total $42,000. Annual cash receipts are predicted to be $135,000. The companys required rate of return is 14 %.

a. Find the net present value of this investment (using the PV of an annuity table will take less time)

b. Should the company purchase the trucks? Explain, using one qualitative factor that may affect the decision.