4.

The Cornell Co. is considering replacing one of its weaving machines with a new, more efficient machine. The new machine would cost $500,000 and have an expected life of 5 years, after which it could be sold for $100,000. The new machine would produce cash benefits of $150,000 per year. The present value of $1 at 15% received after 5 periods at 15% is 0.49718. The present value of an annuity of $1 for 4 periods at 15% is 2.85498, and for 5 periods is 3.35216.

Calculate:

a. the payback period of the new machine;

b. the net present value of the new machine.