A project requires a $2,890,000 initial investment for new machinery with a five-year life and a salvage value of $318,000. The project is expected to yield annual income of $216,540 per year and net cash flows of $709,000 per year for the next five years. The projects accounting rate of return is:

Multiple Choice

• 24.1%.

• 6.3%.

• 13.5%.

• 19.8%.

• 47.2%.

A new manufacturing machine is expected to cost $277,200, have an eight-year life, and a $30,000 salvage value. The machine will yield an annual income of $35,000. Annual depreciation expense is $31,000 per year. Compute the payback period for the purchase.

Multiple Choice

• 8.7 years.

• 3.8 years.

• 4.2 years.

• 7.3 years.

• 5.4 years.