1)George Company has the opportunity to purchase an asset that costs $40,000. The asset is expected to increase net income by $10,000 per year. Depreciation expense will be $5,000 per year. Based on this information the payback period is:

Multiple Choice

2.67 years.

8 years.

4 years.

2.5 years.

2)

Shenandoah Springs Company is considering two investment opportunities whose cash flows are provided below:

Year	Investment A						Investment B
0		$	(15,000	)				$	(9,000	)
1			5,000						5,000
2			5,000						4,000
3			5,000						3,000
4			4,000						1,000

The company's hurdle rate is 12%. What is the present value index of Investment B? Use Appendix Table 1. (Do not round your intermediate calculations. Round your answer to two decimal points.)

Multiple Choice

1.01

1.16

0.86

None of these answers is correct.