Munoz Electronics is considering investing in manufacturing equipment expected to cost $300,000. The equipment has an estimated useful life of four years and a salvage value of $ 17,000. It is expected to produce incremental cash revenues of $150,000 per year. Munoz has an effective income tax rate of 40 percent and a desired rate of return of 12 percent. (PV of $1andPVA of $1)(Use appropriate factor(s) from the tables provided.)

Required

1. Determine the net present value and the present value index of the investment, assuming that Munoz uses straight-line depreciation for financial and income tax reporting.
2. Determine the net present value and the present value index of the investment, assuming that Munoz uses double-declining-balance depreciation for financial and income tax reporting.
3. Determine the payback period and unadjusted rate of return (use average investment), assuming that Munoz uses straight-line depreciation.
4. Determine the payback period and unadjusted rate of return (use average investment), assuming that Munoz uses double-declining-balance depreciation. (Note:Use average annual cash flow when computing the payback period and average annual income when determining the unadjusted rate of return.)