3. Chris has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $127,000 cash payment today. The second option is to receive $22,400 at the end of each of the next 19 years and a $34,900 lump sum payment in the 20th year. Chris can invest money at a 9% rate. Click here to view the factor table. (a) Calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.)

4. Blue Spruces Lawn Service needs to purchase a new lawnmower costing $8,396 to replace an old lawnmower that cannot be repaired. The new lawnmower is expected to have a useful life of 6 years, with no salvage value at the end of that period. Click here to view the factor table.

(a)

If Blue Spruces required rate of return is 11%, what level of annual cash savings must the lawnmower generate to be considered an acceptable investment under the net present value method? (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.)

Annual cash savings should be

$enter the annual cash savings in dollars

(b)

If Blue Spruces required rate of return is 16%, what level of annual cash savings must the lawnmower generate to be considered an acceptable investment under the net present value method? (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.)

Annual cash savings should be

$enter the annual cash savings in dollars

6. Grouper Hammocks is considering the purchase of a new weaving machine to prepare fabric for its hammocks. The machine under consideration costs $80,520 and will save the company $12,000 in direct labor costs. It is expected to last 10 years. Click here to view the factor table. (a) Calculate the internal rate of return on the weaving machine. (Round answer to 0 decimal place, e.g. 15.)

Internal rate of return

enter the internal rate of return in percentages rounded to 0 decimal places %

(b) If Grouper uses a 10% hurdle rate, should the company invest in the machine? select an option Yes or No Which option should Chris choose to receive his winnings?

select an option Option 1Option 2

(b) If Chris could invest money at 12%, calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.)

		Option 1		Option 2
Present value		$enter a dollar amount		$enter a dollar amount

Which option should he choose?

select an option yes or no

7. Garrett Boone, Concord Enterprises vice president of operations, needs to replace an automatic lathe on the production line. The model he is considering has a sales price of $440,580 and will last for 15 years. It will have no salvage value at the end of its useful life. Garrett estimates the new lathe will reduce raw materials scrap by $45,000 per year. He also believes the lathe will reduce energy costs by $3,000 per year. If he purchases the new lathe, he will be able to sell the old lathe for $3,400. Click here to view the factor table. (a) Calculate the lathes internal rate of return. (Round answer to 0 decimal places, e.g. 25%.)

Internal rate of return

enter the internal rate of return in percentages rounded to 0 decimal places

%

(b) If Concord Enterprises uses a 5% hurdle rate, should Garrett purchase the lathe? select an option Yes or No (c) Without doing any calculations, what do you know about the lathes net present value? Net present value will be equal to $0less than $0greater than $0.

8. Riverbeds Accounting Museum is exploring the purchase of a new building with a useful life of 15 years to use as its main gallery space. The building will cost $1,098,000. Once it has been purchased, the museum will terminate its current lease, which costs $65,700 per year. The new gallery will allow the museum to display more of its permanent collection, as well as to showcase traveling exhibits. The increased exhibit space, along with the new buildings location, is expected to increase admissions revenue by $25,800 per year. Calculate the payback period for the proposed investment in the building. Assume that all cash flows occur evenly throughout the year.

Payback period

enter the payback period in years years