Q.1

B&T is considering the purchase of a machine that promises to reduce operating costs by the same amount for every year of its six-year useful year. The machine costs $83,150 and has no salvage value. It has a 20% internal rate of return. (Ignore income tax in this problem)

What is the annual cost savings promised by the machine?

Q.2

Consider each of the situation independently

Annual cash inflows from 2 competing investment opportunities are given below. Each investment opportunity requires the same initial investment.

2.1 Compute the present value of the cash inflows for each investment using a 20% discount rate.