A company is planning to purchase a machine that will cost $84,000, have a six-year life, and be depreciated using the straight-line method with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below.

Sales		$150,000
Costs:
Manufacturing	$67,000
Depreciation on machine	14,000
Selling and administrative expenses	45,000	(126,000)
Income before taxes		$ 24,000
Income tax (50%)		( 12,000)
Net income		$ 12,000

What is the payback period for this machine?

7.00 years

3.23 years

3.50 years

1.00 year

14.00 years

6.

A given project requires a $63,000 investment and is expected to generate end-of-period annual cash inflows as follows:

Year 1	Year 2	Year 3	Total
$25,200	$15,750	$22,050	$63,000

Assuming a discount rate of 11%, what is the net present value of this investment? Selected present value factors for a single sum are shown in the table below:

i = 11%	i = 11%	i = 11%
n = 1	n = 2	n = 3
0.90090	0.81162	0.73119

$51,609

$20,790

$45,405

($42,210)

($11,391)

7.

A company is planning to purchase a machine that will cost $36,000, have a six-year life, and be depreciated using the straight-line method with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below.

Sales		$102,000
Costs:
Manufacturing	$55,000
Depreciation on machine	6,000
Selling and administrative expenses	33,000	(94,000)
Income before taxes		$ 8,000
Income tax (50%)		( 4,000)
Net income		$ 4,000

What is the accounting rate of return for this machine?

	22.22%
	4%
	11.11%
	33.30%
	50.00%