Metro Clinic, a taxpaying entity, estimtes that it can save $23,000 a year in cash operting costs for the next 8 years if it buys a special-purpose eye-testing machine at a cost of $90,000. No terminal disposal value is expected. Metro Clinic's required rate of return is 10%. Assume all cash flows occur at year-end except for initial investment amounts. Meteo Clinic uses straight-line depreciation. The income tax rate is 28% for all transactions that affect income taxes.

Requirements:

1. Calculate the following for the special-purpose eye-testing machine:

a. Net present value

b. Payback period

c. Internal rate of return

d. Accural accounting rate of return based on net initial investmenf

e. Accural accounting rate of return based on average investmenf

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 8 years? Assume depreciation deductions are based on the $90,000 purchase cost and zero terminal disposal value using the straight-line method. Answer breifly in words without further calculations.

0227 Present Value of $1 Periods 2% 4% 8% 10% 12% 16% 18% Period 1 0.950 0962 0.943 0.926 0909 0.893 0872 0862 0.847 Period 2 0 951 0925 0.890 0857 0826 0.797 0.769 0743 0.718 Period 3 0.9420889 0 840 0.794 0.751 0712 0.675 0.641 0.609 Period 4 0.924 0.855 0.792 0.735 0.683 0.630 0592 0.552 0 516 Period 5 0.906 0822 0.747 0.681 0.621 0567 0.519 0.476 0437 Period 6 0.888 0.790 0.705 0.630 0 564 0507 0456 0.410 0370 Period 7 0.871 0.750 0.665 0583 0.513 0.452 0.400 0.354 0.314 Period0.853 0.731 0.627 0.540 0.467 0.404 0.351 0305 0.266 Period 0.837 0.703 0.592 0500 0.424 0.361 0.308 0283 0.225 Period 10 0 820 0.676 0558 0.463 0.386 0322 0270 0.191 Period 11 0.804 0650 0.527 0.429 0.350 0287 0237 0.195 0.162 Period 12 0.788 0.625 0.497 0397 0.319 0.257 0208 0 168 0.137 Period 13 0 773 0.601 0.400 0.360 0.290 0 220 0.182 0 145 0 116 Period 14 0.758 0.577 0442 0.340 0.263 0.205 0-100 0.125 0099 Period 15 0.743 0555 0417 0315 0.230 0.183 0 140 0.108 0.084 Perlod 16 0 728 0534 0.394 0292 0218 0.163 0.123 0.093 0071 Period 17 0714 0.513 0 371 0.270 0.198 0.146 0.106 0.0800000 Period 18 0.750 0.494 0.350 0.250 0.160 0.130 0.095 0069 0.051 Period 19 0.686 0.475 0.331 0232 0164 0.116 0083 0.060 0.043 Period 20 0.673 0.456 0.312 0215 0.149 0.104 0.073 0 051 0037 Period 21 0600 0439 0.294 0.199 0.135 0.093 0.064 0.044 0031 Period 22 0.647 0.422 0278 0.184 0.123 OOBS 0.050 0.038 0026 Period 23 0.634 0.406 0.262 0.170 0.112 0074 0049 0.033 0022 Period 24 0 622 0390 0247 0.158 0.102 0.066 0.043 0028 0.019 Period 25 0.610 0.375 0.233 0140 0.092 0050 0.036 0.024 0016 Period 26 0.508 03610220 0.135 0.014 0.053 0.033 0 021 0014 Period 27 0 58503470207 0.125 0.078 0.047 0.029 0018 0011 Period 28 0574 0333 0.100 0.116 0.000 0.042 0.020 0010 0010 Period 29 0563 0.321 0.185 0.107 0 000 0037 0.022 0.014 0.008 Period 30 0 552 0308 0.174 0.000 0.057 0.033 0.020 0.012 0.007 Period 35 0.500 0.253 0.130 0.068 003 0019 0.010 0006 0003 Perled 40 0.453 0.200 0097 0.040 0 022 0.011 0.005 0.003 0001 20% 22% 24% 26% 28% 30% 32% 40% Periods 0.833 0820 0.806 0.794 0.781 0.769 0.758 0.714 Period 1 0.694 0672 0.650 0.630 0.610 0.592 0 574 0.510 Period 2 0.579 0551 0.524 0.500 0.477 0.455 0435 0.364 Period 3 0.482 0.451 0423 0.397 0.373 0.350 0.329 0 260 Period 4 0.402 0.370 0.341 0.315 0291 0.269 0.250 0.186 Period 5 0335 0.303 0.275 0.250 0.227 0207 0.189 0.133 Period 6 0279 0.249 0 222 0.198 0.178 0.150 0.143 0.095 Period 7 0.233 0204 0.179 0.157 0.139 0.123 0.108 0.068 Period & 0.194 0.167 0144 0.125 0.100 0.094 0.002 0.048 Period 9 0.162 0.137 0.116 0 099 0.085 0.073 0062 0.035 Period 10 0.135 0 112 0.094 0.079 0.056 0.056 0.047 0.025 Period 11 0.112 0092 0.076 0.052 0.052 0.043 0036 0.018 Period 12 0.093 0075 0.061 0.050 0.040 0.033 0.027 0.013 Period 13 0078 0062 0049 0.039 0032 0025 0021 0.009 Period 14 0065 0 051 0 040 0.031 0.025 0.020 0016 0.006 Period 15 0054 0.042 0.032 0.025 0019 0015 0012 0.005 Period 10 0045 0.034 0.026 0020 0.015 0.012 0.0090.003 Period 17 0038 0028 0.021 0.016 0.012 0.000 0.007 0.002 Period 18 0.031 0023 0.017 0012 0.000 0.007 0.005 0.002 Period 19 0.026 0019 0.014 0.010 0.007 0.005 0004 0.001 Period 20 0.022 0.015 0.011 0.008 0.006 0.004 0.003 0,001 Period 21 0010 0013 0.000 0.006 0004 0.003 0.002 0 001 Period 22 0.015 0010 0.005 0.003 0.002 0.002 0000 Period 23 0.013 0.000 0.000 0.004 0.003 0.002 0001 0.000 Period 24 0010 0.007 0.005 0.003 0.002 0001 0.001 0.000 Period 25 0 000 0 000 0.004 0.002 0 002 0.001 0001 0.000 Period 26 0007 0005 0.003 0.002 0001 0.001 0.001 0.000 Period 27 0.000 0004 0.002 0.002 0.001 0001 0 000 0.000 Period 28 0.005 0.003 0.002 0.001 0.001 0 000 0 000 0.000 Period 29 0004 0.003 0.002 0.001 0.001 0 000 0.000 0.000 Period 30 0.002 0.001 0001 0.000 0.000 0.000 0 000 0.000 Period 35 0.001 0.000 0.000 0.000 0 000 0.000 0 000 0.000 Period 40 0 007 4494 Present Value of Annuity of $1.00 in Artears Periods 2% 4% 6% 8% 10% 12% 14% Period 1 0.980 0.962 0.943 0926 0.900 0893 0.877 Period 2 1.942 1 886 1.833 1.783 1.736 1,690 1.647 Period 3 2.884 2775 2673 2577 2487 2402 2322 Period 4 3.808 3.630 3.465 3.312 3.170 3037 2914 Perlod 5 4.713 4452 4212 3.993 3.791 3.805 3.433 Period 6 5.601 5242 4.917 4.623 4355 4. 111 3.889 Period 7 3.472 6.002 5.582 5 206 4888 4.564 4 288 Period 7.325 6.733 6.210 5.747 5.335 4.968 4.639 Period 8.162 7.435 6.802 6 247 5.759 5328 4.946 Period 10 8.983 8.111 7360 6710 6.145 5650 5216 Period 11 9.787 8.760 7587 7139 6.495 5.938 5.453 Period 12 10 575 9.385 8.384 7536 0814 6.194 5660 Period 13 11.3489.986 8.853 7.904 7.103 6.424 5.842 Period 14 12.106 10.563 9.295 8.244 7.367 5628 6.002 Period 15 12.849 11.118 9.712 8.559 7.606 6811 6.142 Period 16 13.578 11.652 10.106 8.851 7824 6.974 6.265 Period 17 14 292 12.166 10.477 9.122 8.022 7.120 6.373 Period 18 14 092 12.659 10 828 9.372 8.201 7250 0467 Period 19 15.678 13.134 11.150 9.604 8.365 7360 6550 Period 20 16 351 13.500 114709818 8.514 7469 6623 Period 21 17011 14.029 11.764 10017 8.649 7.562 6687 Period 22 17 658 14.451 12.042 10 201 8.772 7.645 6.743 Period 23 18.292 14.657 12 303 10.371 8.883 7 718 6.792 Period 24 18 914 15 247 12.550 10.529 8.905 7.784 5.835 Period 25 10.523 15 622 12783 10,675 9077 7 M 6873 Period 26 20 121 1598) 13.003 108109161 7.80 6.900 Period 27 20.707 16 33013211 10 936 237 7.943 6.035 Period 28 21 281 16.663 13.406 11.051 307 6.901 Period 29 21844 16.054 13.501 11.158 370 8022 6.983 Period 30 22 396 17.292 13.765 1.250 2.427 8.055 7003 Period 35 24 99918 605 14.498 11.655 9544 8.176 7070 Period 40 27 555 19.793 15046 11.925 779 6.244 7105 "Payment for receipts) at the end of each period 16% 0.802 1.805 2 246 2.798 3 274 3.685 4.039 4344 4 607 4833 5029 5.197 5.342 5.468 5.575 5.668 5.749 5.818 5.877 5.929 5.973 6011 8044 6073 8007 6.110 6.138 6.152 6.100 6177 8215 8233 18% 20% 0847 0.833 1.566 1.528 2174 2106 2 600 2589 3.127 2991 3.498 3.326 3.812 3.605 4.078 3.837 4303 4,031 4.192 4656 4327 4.793 4.439 4.910 4533 5008 4611 5092 4675 5.162 5222 4775 5273 4812 5316 4843 5353 4870 5.384 4891 5.410 4900 5.432 4.925 5.451 4037 5.467 4048 5.480 4950 5492 4.964 5.502 4970 5.510 4975 5.517 4970 5539 4902 5.548 4997 22% 0.620 1.492 2042 2494 2.864 3.167 3.416 3.619 3.786 3.923 4.035 4 127 4203 4265 4315 4.357 4391 4419 4.442 4460 4.476 4488 4490 4507 4514 4520 4524 4520 4531 4534 4541 4544 4.730 24% 26% 28% 30% 32% 40% Periods 0806 0.794 0.781 0.769 0.758 0.714 Period 1 1.457 1.424 1 392 1.361 1.331 1.224 Period 2 1.981 1.923 1.868 1.816 1.766 1.589 Period 3 2404 2320 2241 2 166 2.096 1.849 Period 4 2745 2635 2532 2436 2345 2035 Perlod 5 3.020 2.885 2.759 2843 2534 2.168 Period 6 3.242 3.083 2937 2802 2677 2 263 Period 7 3421 3241 3.076 2925 2786 2 331 Period & 3 566 3366 3184 3.019 2868 2379 Period 3682 3.465 3.269 3092 2930 2.414 Period 10 3.776 3.543 3335 3.147 2978 2.438 Period 11 3.851 3.000 3.387 3.190 3.013 2458 Period 12 3.912 3.650 3.427 3223 3040 2469 Period 13 3.962 3.695 3.459 3.249 3061 2478 Period 14 4001 3.720 3483 3.268 3.076 2484 Period 15 4033 3.751 3.503 3.283 3.088 2489 Period 16 4050 3.771 3.510 3.295 3.007 2492 Period 17 4080 3.786 3520 3.304 3.104 2.494 Period 18 4,097 3.799 3539 3311 3.109 2490 Period 19 4. 110 3.600 3.548 3310 3.113 2497 Period 20 4.121 3.810 3.551 3320 3.110 2498 Period 21 4.130 3.822 3.556 3.323 3.118 2498 Period 22 4137 3.827 3.550 3.325 3.120 2499 Period 23 4143 3.831 3.662 3327 3.121 2499 Period 24 4.147 3634 3564 3320 3122 2.499 Period 25 4.151 3.837 3.560 3.330 3.123 2.500 Period 20 4.154 3.800 3.567 3331 3.123 2.500 Period 27 4.157 3.840 3568 3331 3.124 2.600 Period 28 4 150 3841 35403332 3.124 2500 Period 20 4.160 3.842 3.560 3332 3.124 2.500 Period 30 4164 3845 3571 3333 3.125 2.500 Period 35 4.166 3840 3.571 3333 3125 2500 Period 40 7.94 1925 Compound Amount of $100 (The Future Value of $1.00) Periods 2% 4% 6% 8% 10% 12% 14% 16% 10% 20% 225 26% 28% 30% 32% 40% Periods Period 1 1020 1.040 1060 1080 1.100 1.120 1.140 1.160 1180 1 200 1.220 1.240 1.260 1.280 1.300 1320 Period 2 1.040 1082 1400 Period 1 1.124 1.166 1.210 1.254 1 300 1.346 1 392 1.440 1.488 1.588 1538 1.638 1.690 Perlod 3 1061 1.125 1742 1960 Period 2 1.191 1.250 1.331 1405 1.482 1.561 Period 4 1.052 1.170 1.643 1728 1816 1.907 1.262 2000 2.097 2300 2.197 2.744 Period 3 1.360 1.464 1.574 1.689 1 811 1939 2.074 Period 5 1 104 1217 2215 2354 2520 2684 3038 1.338 2.850 3.842 1.469 Period 4 1611 1762 2.100 2.268 2488 Period 6 1.126 1265 2.703 2832 3.176 3.436 3.713 4007 1.419 Period 5 5378 1587 1.772 1.974 2.195 2436 2700 2.986 3.297 3635 Period 7 1.149 1316 4002 4390 1.504 5.290 4827 7.530 Period 6 1714 1.949 2211 2502 2.826 3.185 3583 4023 Period 1.172 1360 4.508 5.042 5.620 6.275 6.983 1.594 10 541 Period 7 1.851 2144 2.476 Period 9 1195 1423 2853 3278 3.750 4300 4.008 5.500 6.353 7.206 8.157 1.689 9.217 14.750 Periods 1.999 2358 2.773 3.252 3.803 Period 10 1 219 1.450 4.435 5.100 5 987 6931 2159 8.005 9.223 10.604 1791 12.166 2 594 Period 9 3.106 3.707 4411 20 661 Period 11 1 243 1530 5234 6.192 7.305 8.594 10.066 11.06 13.786 16060 2332 20.925 Period 10 1.898 2853 3.479 4226 5.117 6.176 7430 8912 Period 12 1.268 1601 10.657 12.708 15.112 2012 2510 17.922 Period 11 3.896 21.190 40.496 3.138 4818 5.936 7.28 8916 10.872 Period 131 294 1665 2133 13.215 16.012 19.343 23 290 27.983 56.694 Period 12 2720 4363 3.452 5.492 Period 14 1319 1732 6.886 8.500 13 264 10.600 16 380 20.175 24.750 2.28 36.937 2937 30.268 Period 13 3.797 4.887 79.371 Period 15 1 346 1801 6.261 7.988 10.147 12 839 16.182 3172 20 319 25421 31.691 39.374 48.757 4.177 Period 14 5.474 111. 120 Period 16 1373 1873 7.138 9.265 11.974 15 407 19.742 25190 32030 40565 51.180 64359 155568 Period 15 2 540 3.420 4595 8.137 10 748 14129 Period 17 1400 1.948 18.480 24.086 31 243 40.350 51 923 68.542 84954 2000 3.700 217 795 Period 10 5054 6.666 9.276 12.468 1692 Period 18 1428 2026 22.186 29384 38.741 66.461 50 851 66 504 2854 112.139 Period 17 7.690 3044913 3.996 6580 10 575 14.453 19.00 Period 19 1457 2.107 26.623 35 849 48030 64072 85071 112.455 148 024 3.026 Period 18 4316 G. 116 426879 8.613 Period 20 1 486 2.191 12056 16.777 23214 31 940 43.736 4061 59.568 80.731 108.890 3.207 6.727 9.646 146192 Period 19 195,391 597630 13743 19.461 Period 21 1516 2.279 27393 38 338 53.350 73 664 101.721 139.380 190 050 257910 838 683 Period 20 3.400 5034 7.400 10.804 15868 22574 32324 46 005 Period 22 1546 2370 65 000 91592 128. 109 178.400 247065 340.449 3.604 5.437 1171.350 Period 21 8.140 12.100 97881 20.180 Period 23 1577 2465 38. 142 55206 79418 113 574 101492 228300 3.820 449333 5.871 321.184 8954 13.552 20362 1639.098 Period 22 30370 45 000 06 247 90859 Period 24 1 608 2563 140831 203 480 292 300 6341 417.539 590199 4040 Period 23 9850 1517923212 35 230 53.109 2295 657 Period 25 1.641 2866 79.497 118205 4202 174831 256.385 6.548 10 855 17 000 26.462 374144 542 801 783023 3214200 Period 24 60874 62 600 Period 26 1673 2772 95.390 144 210 216 542 4540 730611918 19.010 30.167 323.045 47414 478.005 70861 1033.590 4400.880 Period 25 73.049 114 475 175 936 268 512 Period 27 1707 2.883 407037 012.08 017333 1364 339 4522 7008 13.110 21 325 34300 6299.831 Period 20 55.000 87 200 Period 28 1741 2. 137 371 214542332055 5.112 3627 4421 23 34 39 204 512867 784638 1192533 1000027 63.300 102.967 10.764 Period 27 164545 Period 29 1770 3.119 5.410 261 864 412 804 646.212 1004336 9317 15 3 26.750 44 633 1550 293 2377 224 12347 070 Period 28 74.000 121 501 107814 Period 30 1011 3243 574) 10.063 17:449 29.950 50 950 319.474 511 52 014228 1265 550 2015 301 3137935 17280.737 Period 29 5.650 143371 237.376 389.750 634 820 Period 35 2.000 3.946 1025 927 760 14.785 26.102 2.800 100 100.314 327.907 590 668 1053 402 1661054 3258.135 1645 505 2019 990 4142075 24201 452 Period 30 Period 40 2 200 4801 16 216 21725 45 250 93051 8034 376.721 750 370 1400 772 2M7038 5455013 10347.175 104426 60 3611686566520 707 700037697 Period 40 5653 911 9727860 16500 217 130161.112 Period 35 2397 6130 1000 16.499 40236 Compound Amount of Annuity of $1.00 in Arrears (Future Value Annuity) Periods 2% 4% 8% 10% 1296 14% 10% 10% 20% 22% 245 20% 20% 30% 324 40% Periods Period 1 1000 1000 1000 1000 1.000 1.000 1.000 1000 1000 1000 1 000 1000 1.000 Perlod 2 2020 2040 2050 2080 2100 1000 1.000 1000 Period 1 2120 2140 2.160 2160 2 200 2220 Period 3 3060 3.122 3.14 3.246 3310 2240 2.280 2200 2320 2.300 2400 Period 2 3374 3440 3.500 3892 3640 3.708 3779 3.840 Perlod 4 4.122 4246 4375 4.506 4641 3910 3990 4002 4300 Period 4.779 4.921 5066 5265 5.360 5.524 5684 5.548 Perlod 5 5204 $.416 5.637 5367 5.105 6.010 6.187 0362 7.104 Period 4 6 353 6877 8610 Period 66308 6.633 6,975 73367718 7.154 7.442 7.740 8045 8.360 8.700 9040 9.398 10.046 Periods 8.115 8.535 8 977 9442 9.930 10.442 10980 11.544 12.136 Period T 7434 789883948923 9.481 10 09 10.730 11414 12 142 12.750 13.400 16.324 Period 12 910 13.740 14.015 15 546 16534 Parlod 8 8.583 9.214 9.897 10.637 11.436 12.300 132331424015327 17583 18.896 23.853 Period 7 Period 9 9755 10 583 11491 12488 13.579 147781608597519 19.006 17762 19.123 20.580 22.163 23.858 25.67 34395 Period 8 20.790 22.670 24.712 25940 Period 10 10 950 12.000 53.181 14.487 15937 17549 19:37 21321 23521 29.369 32015 34 895 49.153 Period 25959 28.657 31 643 Period 11 12 169 13.486 14972 16.845 18531 20655 29.045 25.733 28.756 32.150 34945 38.593 42 619 47.062 69.814 Period 10 Period 12 13 41215028 16.870 18.977 21 384 24 130 27 271 30 850 34931 352 45,031 50398 58.405 63. 122 98.730 Period 11 39 581 44874 Period 13 14 550 16.57 18.682 21495 24 523 28 029 320 36786 42219 50 895 57739 65 510 74327 84.320 130.236 Period 12 48497 55.740 04.110 73751 84 850 97.625 112 303 Period 14 15 974 18 212 21.015 24 215 27.975 32 393 37581 43 672 5018 195 929 Period 13 Parled 15 17 293 20 024 23 276 27152 31772 37200 43.142 51.650 80.005 59.196 60010 80 490 93920 100.012 127 913 149240 275 300 Period 14 72035 85.182 100.815 110 347 141 303 Period 16 18 630 21 25 25 673 30324 35.950 42.750 50.00 50.05 7230 167 266 197.997 386420 Period 15 87442 104935 Parod 17 20 01223000 28 213 33 750 40 545 48.8845011871 673 BTOB 10531 120011 151377 181.860 218472 262356 5410 Period 16 Parte 1 2141225 45 30.905 37.450 45.599 55.750 683144141 103.740 128.117 120020 167 253 191735 233791 205014 347 309 750.784 Period 17 158405 1959 Perlod 15 221 27 671 33.700 41 418 51.15063.440 7990.003 123.414 154740 242 585 300 252 371 518 459 440 1064 BOT Period 18 Period 20 24 297 29.778 36.700 45.762 57.275 72 052 01 025 115 300146 628 106.685 1942:54 244033 306 658 305323 483.973 007 472 1401570 Period 19 2379 Paried 21 25.783 31.000 39.990 50423 64002 01039 104768 134.841 174021 925020 303.601 387 380 494213 630185 302 303 2000 200 Period 20 291347 Period 22 27299 34 248 4392 55.457 71403 02 03 120430157415 200 345 271031 377455 4110 633 503 020215 1000 770 2925000 Period 21 30443 400050 Period 23 26 15618 4696 0 193 70.543 104603130207 183.601 241487 326 237 617.270 011.000 1007 200 1401220 4007 M5 Period 24 30 422 30.03 50316 66.765 68.407 118 155 156 150 213.078 20:44 302484 435661 Period 22 502 6:30 778771 104035 1308464 18502 5737 142 Period 23 532.750 Parte 25 32 030 41.00 54.365 73.100 98 47 133 394 1818 249 214 32.603 471081 723.461 12.250 1332650 100 000 2:43821 10320 Period 24 Perted 26 33 671 4431210.15679954 100.10215034 200 333 200008405212 567377 650 955 8000 1238630 170603 25803 32014 112471 Period 25 Period 27 35 344 47004 370687351 121.100 10037428 409 337 502 479 221 681053 795.105 1114614 150163 2057 4200434 15747079 Period 20 Period 28 37051 40685285330 134 210 100 600 272 309 302500606481 310223 971102 1383.141 10719 2708700 39717 6772 22046.10 Period 27 Parted 2 792 626 73640 103148631 214583 312004456303 668.447 9540 1165744 1718 101 248153503344 5164311 74258 30066 674 Period 20 14476 21253127 Paned 30 40 085 7050 115.263 164 494 41333 356787 530312 700 045 181 182 1787081 26100162026 5873 231 6714.604 402923 43214 343 Period 20 Period 35 40.1994 73.652 111.435 172317271 024 431.663 13 573 1120 7131616.652 2048 341 4763 645 7750 225 1252T442 201886 32422 36851800427 325400270 Period 35 8729 25 12940850 00501081 Perlod 30 Period 40 60 402 05.026 154.762259 057442 583 7870911342 0252607574163 215 7343.868 129 535 22720 000 39792 12 60377460 120092 853 207874 272 1750001 741 Period 40 "Payments for rece at the end of each period 3054 45610