Physician's Pharmacy is considering the purchase of a copying machine which it will make available to customers at a per-copy charge. The copying machine has an initial cost of $7,500, an estimated useful life of five years, and an estimated salvage value of $500. The estimated annual revenue and expenses relating to operation of the machine are as follows:

Revenue ...................................................................................................... $8,000

Expenses other than depreciation................................................................................ $5,500

All revenue will be received in cash; expenses other than depreciation will be paid in cash. Depreciation will be computed by the straight-line method.

Answer the following questions. If you select answer d, indicate the correct amount in the space provided.

1Refer to the above data.Acquisition of the copying machine is expected to increase Physician's annual net income by:

a$1,100.c$600.

b$500.dSome other amount.

2Refer to the above data.The annual net cash flow expected from the investment in the machine is:

a$1,000.c$500.

b$600.d$2,500.

3Refer to the above data.The payback period on this investment is estimated at:

a1.125 years.c3 years.

b7.5 years.dNone of these answers.

4Refer to the above data.The expected rate of return on average investment is:

a27.5%.c60%.

b33 1/3%.dSome other rate.

5Refer to the above data.The net present value of the proposed investment, discounted at an annual rate of 15% and rounded to the nearest dollar, is (tables show that using a discount rate of 15%, the present value of $1 due in five years is 0.497, and the present value of a fiveyear $1 annuity is 3.352):

a$528.c$(1,405).

b$1,128.50.dSome other amount.