Beacon Manufacturing, Inc. plans to buy a new clipper. The machine costs $125,000, has an estimated life of ten years, and has no salvage value. The machine is expected to have the following effect:

Increasing income                                 $30,000

Incremental expenses:

Expenses other than depreciation         (8,000)

Linear depreciation                                (12.500)

Incremental net income                          $9,500

All income and expenses other than depreciation will be received or paid in cash. Calculate the following for this quote:

1. What is the expected payback on the cutting machine investment? 

2. What is the expected return on average investment for the cutting machine? 

3. What is the net present value of the cutting machine at 10% discount per year, if the present value of the 10% discounted ten-year $1 annual income is 6,145?

4. What is the net present value of the cutting machine discounted at 20% per year, if the present value of the ten-year $1 annual income discounted at 20% is 4,192?

5. What is the expected annual net cash flow from the cutting machine investment?