Present Value of $1.00

Rate 8% 10% 12% 14%

Period

1 .9259 .9091 .8929 .8772

2 .8573 .8264 .7972 .7695

3 .7938 .7513 .7118 .6750

4 .7350 .6830 .6355 .5921

5 .6806 .6209 .5674 .5194

Present Value of $1.00 Received per Period

Rate 8% 10% 12% 14%

Period

1 .9259 .9091 .8929 .8772

2 1.7833 1.7355 1.6901 1.6467

3 2.5771 2.4869 2.4018 2.3216

4 3.3121 3.1699 3.0373 2.9137

5 3.9927 3.7908 3.6048 3.4331

Prospect Park Department is considering a new capital investment. The following information is available on the investment. The cost of the machine will be $72,096. The annual cost savings if the new machine is acquired will be $20,000. The machine will have a 5-year life, at which time the terminal disposal value is expected to be zero. Prospect Park is assuming no tax consequences. Prospect Park has a 10% required rate of return. What is the payback period on this investment?

A 3 years
B		3.6 years
C		4.2 years
D		5 years