1. Brian, venture capitalist is reviewing a loan application where the client is considering a new machine. The machine will cost $80,000 and generate cost savings of $12,000 per year. What is the payback period?

Answer:_________

2. Using the same information as in the above question, with a cost of capital of 8% but the machine generates a cost savings of $16,000 and has an estimated useful life of 8 years with no residual value, what is the present value of the machine in todays dollars?

Answer: ____________________________