Lincoln Research, a taxpaying entity, estimates that it can save $30,000 a year in cash operating costs for the next 10 years if it buys a special-purpose eye-testing machine at a cost of $135,000. No terminal disposal value is expected. Lincoln Research's required rate of return is 14%. Assume all cash flows occur at year-end except for initial investment amounts. Lincoln Research uses straight-line depreciation. The income tax rate is 34% for all transactions that affect income taxes. Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. a. Net present value (NPR) (Round interim calculations and your final answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.) The net present value is b. Payback period (Round your answer to two decimal places.) The number of years for the payback period is c. Internal rate of return (Round the rate to two decimal places, X.XX%.) The internal rate of return (IRR) is %. d. Accrual accounting rate of return based on net initial investment (Round interim calculations to the nearest whole dollar. Round the rate to two decimal places, X.XX%.) Based on the net initial investment, the accrual accounting rate of return (AARR) is %. e. Accrual accounting rate of return based on average investment (Round interim calculations to the nearest whole dollar. Round the rate to two decimal places, X.XX%.) Based on average investment, the accrual accounting rate of return (AARR) is %. Requirement 2. How would your computations in requirement 1 be affected if the special-purpose machine had a $13,000 terminal disposal value at the end of 10 years? Assume depreciation deductions are based on the $135,000 purchase cost and zero terminal disposal value using the straight-line method. Answer briefly in words without further calculations. NPV would because the disposal value Payback would because the disposal value IRR would because the disposal value does not affect average annual operating income. does not affect the net initial investment. AARR would because the disposal value results in a decrease in average annual operating income. under either method. results in a decrease to the net initial investment. results in an increase in average annual operating income. Choose from any list or enter any number in the input field results in an increase in the total present value of cash inflows. results in an increase to the net initial investment. Save for Later Compound Amount of Annuity of $1.00 in Arrears* (Future Value of Annuity) Periods 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Period 1 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Period 2 2.020 2.040 2.060 2.080 2.100 2.120 2.140 2.160 2.180 2.200 Period 3 3.060 3.122 3.184 3.246 3.310 3.374 3.440 3.506 3.572 3.640 Period 4 4.122 4.246 4.375 4.506 4.641 4.779 4.921 5.066 5.215 5.368 Period 5 5.204 5.416 5.637 5.867 6.105 6.353 6.610 6.877 7.154 7.442 Period 6 6.308 6.633 6.975 7.336 7.716 8.115 8.536 8.977 9.442 9.930 Period 7 7.434 7.898 8.394 8.923 9.487 10.089 10.730 11.414 12.142 12.916 Period 8 8.583 9.214 9.897 10.637 11.436 12.300 13.233 14.240 15.327 16.499 Period 9 9.755 10.583 11.491 12.488 13.579 14.776 16.085 17.519 19.086 20.799 Period 10 10.950 12.006 13.181 14.487 15.937 17.549 19.337 21.321 23.521 25.959 Period 11 12.169 13.486 14.972 16.645 18.531 20.655 23.045 25.733 28.755 32.150 Period 12 13.412 15.026 16.870 18.977 21.384 24.133 27.271 30.850 34.931 39.581 Period 13 14.680 16.627 18.882 21.495 24.523 28.029 32.089 36.786 42.219 48.497 Period 14 15.974 18.292 21.015 24.215 27.975 32.393 37.581 43.672 50.818 59.196 Period 15 17.293 20.024 23.276 27.152 31.772 37.280 43.842 51.660 60.965 72.035 Period 16 18.639 21.825 25.673 30.324 35.950 42.753 50.980 60.925 72.939 87.442 Period 17 20.012 23.698 28.213 33.750 40.545 48.884 59.118 71.673 87.068 105.931 Period 18 21.412 25.645 30.906 37.450 45.599 55.750 68.394 84.141 103.740 128.117 Period 19 22.841 27.671 33.760 41.446 51.159 63.440 78.969 98.603 123.414 154.740 Period 20 24.297 29.778 36.786 45.762 57.275 72.052 91.025 115.380 146.628 186.688 Period 21 25.783 31.969 39.993 50.423 64.002 81.699 104.768 134.841 174.021 225.026 Period 22 27.299 34.248 43.392 55.457 71.403 92.503 120.436 157.415 206.345 271.031 Period 23 28.845 36.618 46.996 60.893 79.543 104.603 138.297 183.601 244.487 326.237 22% 1.000 2.220 3.708 5.524 7.740 10.442 13.740 17.762 22.670 28.657 35.962 44.874 55.746 69.010 85.192 104.935 129.020 158.405 194.254 237.989 291.347 356.443 435.861 24% 1.000 2.240 3.778 5.684 8.048 10.980 14.615 19.123 24.712 31.643 40.238 50.895 64.110 80.496 100.815 126.011 157.253 195.994 244.033 303.601 377.465 469.056 582.630 26% 1.000 2.260 3.848 5.848 8.368 11.544 15.546 20.588 26.940 34.945 45.031 57.739 73.751 93.926 119.347 151.377 191.735 242.585 306.658 387.389 489.110 617.278 778.771 28% 1.000 2.280 3.918 6.016 8.700 12.136 16.534 22.163 29.369 38.593 50.398 65.510 84.853 109.612 141.303 181.868 233.791 300.252 385.323 494.213 633.593 811.999 1040.358 Compound Amount of $1.00 (The Future Value of $1.00) Periods 2% 4% 6% 8% 10% 12% 14% Period 1 1.020 1.040 1.060 1.080 1.100 1.120 1.140 Period 2 1.040 1.082 1.124 1.166 1.210 1.254 1.300 Period 3 1.061 1.125 1.191 1.260 1.331 1.405 1.482 Period 4 1.082 1.170 1.262 1.360 1.464 1.574 1.689 Period 5 1.104 1.217 1.338 1.469 1.611 1.762 1.925 Period 6 1.126 1.265 1.419 1.587 1.772 1.974 2.195 Period 7 1.149 1.316 1.504 1.714 1.949 2.211 2.502 Period 8 1.172 1.369 1.594 1.851 2.144 2.476 2.853 Period 9 1.195 1.423 1.689 1.999 2.358 2.773 3.252 Period 10 1.219 1.480 1.791 2.159 2.594 3.106 3.707 Period 11 1.243 1.539 1.898 2.332 2.853 3.479 4.226 Period 12 1.268 1.601 2.012 2.518 3.138 3.896 4.818 Period 13 1.294 1.665 2.133 2.720 3.452 4.363 5.492 Period 14 1.319 1.732 2.261 2.937 3.797 4.887 6.261 Period 15 1.346 1.801 2.397 3.172 4.177 5.474 7.138 Period 16 1.373 1.873 2.540 3.426 4.595 6.130 8.137 Period 17 1.400 1.948 2.693 3.700 5.054 6.866 9.276 Period 18 1.428 2.026 2.854 3.996 5.560 7.690 10.575 Period 19 1.457 2.107 3.026 4.316 6.116 8.613 12.056 Period 20 1.486 2.191 3.207 4.661 6.727 9.646 13.743 Period 21 1.516 2.279 3.400 5.034 7.400 10.804 15.668 Period 22 1.546 2.370 3.604 5.437 8.140 12.100 17.861 Period 23 1.577 2.465 3.820 5.871 8.954 13.552 20.362 16% 1.160 1.346 1.561 1.811 2.100 2.436 2.826 3.278 3.803 4.411 5.117 5.936 6.886 7.988 9.266 10.748 12.468 14.463 16.777 19.461 22.574 26.186 30.376 18% 1.180 1.392 1.643 1.939 2.288 2.700 3.185 3.759 4.435 5.234 6.176 7.288 8.599 10.147 11.974 14.129 16.672 19.673 23.214 27.393 32.324 38.142 45.008 20% 1.200 1.440 1.728 2.074 2.488 2.986 3.583 4.300 5.160 6.192 7.430 8.916 10.699 12.839 15.407 18.488 22.186 26.623 31.948 38.338 46.005 55.206 66.247 22% 1.220 1.488 1.816 2.215 2.703 3.297 4.023 4.908 5.987 7.305 8.912 10.872 13.264 16.182 19.742 24.086 29.384 35.849 43.736 53.358 65.096 79.418 96.889 24% 1.240 1.538 1.907 2.364 2.932 3.635 4.508 5.590 6.931 8.594 10.657 13.215 16.386 20.319 25.196 31.243 38.741 48.039 59.568 73.864 91.592 113.574 140.831 26% 1.260 1.588 2.000 2.520 3.176 4.002 5.042 6.353 8.005 10.086 12.708 16.012 20.175 25.421 32.030 40.358 50.851 64.072 80.731 101.721 128.169 161.492 203.480 28% 1.280 1.638 2.097 2.684 3.436 4.398 5.629 7.206 9.223 11.806 15.112 19.343 24.759 31.691 40.565 51.923 66.461 85.071 108.890 139.380 178.406 228.360 292.300 Present Value of Annuity of $1.00 in Arrears* Periods 2% 4% 6% 8% Period 1 0.980 0.962 0.943 0.926 Period 2 1.942 1.886 1.833 1.783 Period 3 2.884 2.775 2.673 2.577 Period 4 3.808 3.630 3.465 3.312 Period 5 4.713 4.452 4.212 3.993 Period 6 5.601 5.242 4.917 4.623 Period 7 6.472 6.002 5.582 5.206 Period 8 7.325 6.733 6.210 5.747 Period 98.162 7.435 6.802 6.247 Period 10 8.983 8.111 7.360 6.710 Period 11 9.787 8.760 7.887 7.139 Period 12 10.575 9.385 8.384 7.536 Period 13 11.348 9.986 8.853 7.904 Period 14 12.106 10.563 9.295 8.244 Period 15 12.849 11.118 9.712 8.559 Period 16 13.578 11.652 10.106 8.851 Period 17 14.292 12.166 10.477 9.122 Period 18 14.992 12.659 10.828 9.372 Period 19 15.678 13.134 11.158 9.604 Period 20 16.351 13.590 11.470 9.818 Period 21 17.011 14.029 11.764 10.017 Period 22 17.658 14.451 12.042 10.201 Period 23 18.292 14.857 12.303 10.371 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.814 7.103 7.367 7.606 7.824 8.022 8.201 8.365 8.514 8.649 8.772 8.883 12% 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 5.938 6.194 6.424 6.628 6.811 6.974 7.120 7.250 7.366 7.469 7.562 7.645 7.718 14% 0.877 1.647 2.322 2.914 3.433 3.889 4.288 4.639 4.946 5.216 5.453 5.660 5.842 6.002 6.142 6.265 6.373 6.467 6.550 6.623 6.687 6.743 6.792 16% 0.862 1.605 2.246 2.798 3.274 3.685 4.039 4.344 4.607 4.833 5.029 5.197 5.342 5.468 5.575 5.668 5.749 5.818 5.877 5.929 5.973 6.011 6.044 18% 0.847 1.566 2.174 2.690 3.127 3.498 3.812 4.078 4.303 4.494 4.656 4.793 4.910 5.008 5.092 5.162 5.222 5.273 5.316 5.353 5.384 5.410 5.432 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.327 4.439 4.533 4.611 4.675 4.730 4.775 4.812 4.843 4.870 4.891 4.909 4.925 22% 0.820 1.492 2.042 2.494 2.864 3.167 3.416 3.619 3.786 3.923 4.035 4.127 4.203 4.265 4.315 4.357 4.391 4.419 4.442 4.460 4.476 4.488 4.499 24% 0.806 1.457 1.981 2.404 2.745 3.020 3.242 3.421 3.566 3.682 3.776 3.851 3.912 3.962 4.001 4.033 4.059 4.080 4.097 4.110 4.121 4.130 4.137 26% 0.794 1.424 1.923 2.320 2.635 2.885 3.083 3.241 3.366 3.465 3.543 3.606 3.656 3.695 3.726 3.751 3.771 3.786 3.799 3.808 3.816 3.822 3.827 28% 0.781 1.392 1.868 2.241 2.532 2.759 2.937 3.076 3.184 3.269 3.335 3.387 3.427 3.459 3.483 3.503 3.518 3.529 3.539 3.546 3.551 3.556 3.559 30% 0.769 1.361 1.816 2.166 2.436 2.643 2.802 2.925 3.019 3.092 3.147 3.190 3.223 3.249 3.268 3.283 3.295 3.304 3.311 3.316 3.320 3.323 3.325 0 0 0 0 0 0 0 0 0 0 Present Value of $1 Periods 2% 4% Period 1 0.980 0.962 Period 2 0.961 0.925 Period 3 0.942 0.889 Period 4 0.924 0.855 Period 5 0.906 0.822 Period 6 0.888 0.790 Period 7 0.871 0.760 Period 8 0.853 0.731 Period 90.837 0.703 Period 10 0.820 0.676 Period 11 0.804 0.650 Period 12 0.788 0.625 Period 13 0.773 0.601 Period 14 0.758 0.577 Period 15 0.743 0.555 Period 16 0.728 0.534 Period 17 0.714 0.513 Period 18 0.700 0.494 Period 19 0.686 0.475 Period 20 0.673 0.456 Period 21 0.660 0.439 Period 22 0.647 0.422 Period 23 0.634 0.406 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.527 0.497 0.469 0.442 0.417 0.394 0.371 0.350 0.331 0.312 0.294 0.278 0.262 8% 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 0.292 0.270 0.250 0.232 0.215 0.199 0.184 0.170 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149 0.135 0.123 0.112 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104 0.093 0.083 0.074 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 0.237 0.208 0.182 0.160 0.140 0.123 0.108 0.095 0.083 0.073 0.064 0.056 0.049 16% 0.862 0.743 0.641 0.552 0.476 0.410 0.354 0.305 0.263 0.227 0.195 0.168 0.145 0.125 0.108 0.093 0.080 0.069 0.060 0.051 0.044 0.038 0.033 18% 0.847 0.718 0.609 0.516 0.437 0.370 0.314 0.266 0.225 0.191 0.162 0.137 0.116 0.099 0.084 0.071 0.060 0.051 0.043 0.037 0.031 0.026 0.022 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.135 0.112 0.093 0.078 0.065 0.054 0.045 0.038 0.031 0.026 0.022 0.018 0.015 22% 24% 0.820 0.806 0.672 0.650 0.551 0.524 0.451 0.423 0.370 0.341 0.303 0.275 0.249 0.222 0.204 0.179 0.167 0.144 0.137 0.116 0.112 0.094 0.092 0.076 0.075 0.061 0.062 0.049 0.051 0.040 0.042 0.032 0.034 0.026 0.028 0.021 0.023 0.017 0.019 0.014 0.015 0.011 0.013 0.009 0.010 0.007 26% 0.794 0.630 0.500 0.397 0.315 0.250 0.198 0.157 0.125 0.099 0.079 0.062 0.050 0.039 0.031 0.025 0.020 0.016 0.012 0.010 0.008 0.006 0.005 28% 0.781 0.610 0.477 0.373 0.291 0.227 0.178 0.139 0.108 0.085 0.066 0.052 0.040 0.032 0.025 0.019 0.015 0.012 0.009 0.007 0.006 0.004 0.003 30% 0.769 0.592 0.455 0.350 0.269 0.207 0.159 0.123 0.094 0.073 0.056 0.043 0.033 0.025 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.003 0.002 0 0 0 0 0 0 0 0 0 0 0 0 0