The management of Iroquois National Bank is considering an investment in automatic teller machines. The machines would cost $135,700 and have a useful life of seven years. The banks controller has estimated that the automatic teller machines will save the bank $29,500 after taxes during each year of their life (including the depreciation tax shield). The machines will have no salvage value.

Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)

6.

value: 1.50 points

Required information

Required:

1.	Compute the payback period for the proposed investment. (Round your answer to 1 decimal place.)
	Payback period: ? years

7.

value: 1.50 points

Required information

2.

Compute the net present value of the proposed investment assuming an after-tax hurdle rate of: (a) 10 percent, (b) 12 percent, and (c) 14 percent. (Negative amounts should be indicated by a minus sign. Round your final answers to the nearest dollar amount.)

		Net Present Value
a)	10%	?
b)	12%	?
c)	13%	?

8.

value: 1.00 points

Required information

3.	Which of the following statements are true? (Select all that apply.)

The net-present-value method is preferable to the payback method. The payback method is preferable to the net-present-value method. If management uses the payback method, the investment will be approved only if the required payback period is 4.6 years r The cut-off value for the payback period is very much dependent on the bank's hurdle rate. The payback period criterion fails to account for the time value of money The cut-off value for the payback period has nothing to do with the bank's hurdle rate