Investment Analysis & Accounting Treatment for New Asset

sky is considering acquiring a piece of machinery that helps her print designs on new or used skateboards, regardless of which business plan she ends up selecting to move forward with. Please treat this acquisition separate from any other analysis you prepare for income projections; it should not be included in any projections you put together. Below, youll find the details of this purchase:

If she were to acquire this asset, she would have to take out a $75,000 loan for which 5% interest on principal only will be charged annually.

QUESTIONS

1. IS it a good investment ?

2. Calculate and Explain depreciation of the new machine

3. Calculate and explain the payback period

\begin{tabular}{|l|l|} \hline Initial Investment & $75,000 \\ \hline Estimated useful life & 12 years \\ \hline Salvage Value & $3,000 \\ \hline Estimated Annual Cash Flows & \\ \hline Increased Cash Inflows from Machinery & $7,000 \\ \hline Operating and Maintenance Costs & ($2,000) \\ \hline Reduction in Manual Labour & $3,000 \\ \hline Net Annual Cash Flow & $8,000 \\ \hline \end{tabular}