A company can buy a machine that is expected to have a three-year life and a $23,000 salvage value. The machine will cost $1,772,000 and is expected to produce a $193,000 after-tax net income to be received at the end of each year. If a table of present values of $1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from the investment, discounted at 12%?

Multiple Choice

• $108,245

• $568,728

• $618,627

• $692,890

• $1,880,245

  A company is considering the purchase of a new machine for $59,000. Management predicts that the machine can produce sales of $17,100 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $6,900 per year including depreciation of $5,100 per year. Income tax expense is $4,080 per year based on a tax rate of 40%. What is the payback period for the new machine?

  Multiple Choice

• 3.45 years.

• 6.48 years.

• 5.26 years.

• 11.57 years.

• 33.91 years.