Section II Please answer the following questions.

a. A company is considering the purchase of new equipment for $45,000. The projected annual net cash flows are $19,000. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The present value of an annuity of 1 for various periods follows:

Period	Present value of an annuity of 1 at 12%
1	0.8929
2	1.6901
3	2.4018

b. What is the net present value of this machine assuming all cash flows occur at year-end?

$(1,768)

$3,000

$634

$19,000

$45,634

c. Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,000 and will produce cash flows as follows:

End of Year	Investment
	A	B
1	$8,000	$0
2	8,000	0
3	8,000	24,000

The present value factors of $1 each year at 15% are:

1	0.8696
2	0.7561
3	0.6575

The present value of an annuity of $1 for 3 years at 15% is 2.2832 The net present value of Investment A is:

$18,266.

$(15,000).

$9,000.

$(20,549).

$3,266.