Newman Labs is considering buying equipment, which would enable the company to obtain a five-year research contract. The specialized equipment costs $650,000 and will have no salvage value when the five-year contract period is over. The estimated annual operating results of the project are as follows: Revenue $ 750,000 Expenses (including straight-line depreciation) (650,000) Increase in net income $ 100,000 All revenue from the contract and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes. What is the net present value of this investment, using a discount rate of 12%? (Note: An annuity table shows that the present value of $1 received annually for five years, discounted at 12%, is 3.605.)

Question 11 options:

$179,150

$289,500

$829,150

$468,650

Rooney, Incorporated is considering the purchase of a new machine costing $600,000. The machine's useful life is expected to be 7 years with no salvage value. The straight-line depreciation method will be used. The net increase in annual after-tax cash flow is expected to be $152,000. Rooney estimates its cost of capital to be 15%. (The present value of a $1 annuity for 7 years at 15% is 4.160, and the present value of $1 to be received in 7 years is 0.376.) The net present value of the investment in the machine under consideration is:

Question 14 options:

$73,600.

$152,000.

$32,320.

$85,714.