1. CAPITAL BUDGETING

Flynn Corporation is debating whether to purchase a new computerized production system. The system will cost $450,000, and have an estimated 10-year life with a salvage value of $70,000. The estimated operating results from the new production system are as follows:

Incremental revenue......................................................		$180,000
Incremental expenses:...................................................
Expenses other than depreciation.........................	$85,000
Depreciation (straight-line basis)...........................	38,000	(123,000)
Incremental net income..................................................		$57,000

All revenue and expenses other than depreciation will be received and paid in cash. Compute the following for this proposal:

a. Annual net cash flow: $__________

b. Payback period: __________ years

c. Return on average investment: __________%

d. Net present value, discounted at an annual rate of 6% (present value of $1 due in 10 years, discounted at 6%, is 0.558; present value of $1 received annually for 10 years, discounted at 6%, is 7.360): $__________