1.The net present value and internal rate of return methods of capital budgeting are superior to the payback method because they:

are easier to implement.

consider the time value of money.

require less data.

reflect the effects of depreciation and income taxes.

2.(Ignore income taxes in this problem.) A company with $600,000 in operating assets is considering the purchase of a machine that costs $72,000 and which is expected to reduce operating costs by $18,000 each year. These reductions in cost occur evenly throughout the year. The payback period for this machine in years is closest to:

4 years

8.3 years

0.25 years

33.3 years