The management of Iroquois National Bank is considering an investment in automatic teller machines. The machines would cost $134,400 and have a useful life of seven years. The banks controller has estimated that the automatic teller machines will save the bank $28,000 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.)

Required:

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

	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.)

3.	Which of the following statements are true?

The net-present-value method is preferable to the payback method.checkbox unchecked1 of 6 The payback method is preferable to the net-present-value method.checkbox unchecked2 of 6 The payback period criterion fails to account for the time value of money.checkbox unchecked3 of 6 If management uses the payback method, the investment will be approved only if the required payback period is 4.8 years or more.checkbox unchecked4 of 6 The cut-off value for the payback period is very much dependent on the bank's hurdle rate.checkbox unchecked5 of 6 The cut-off value for the payback period has nothing to do with the bank's hurdle rate.checkbox unchecked6 of 6