The Pronghorn Company is planning to purchase $491,000 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the following annual cash ows for the investment. Projected Cash Year Flows 1 $177,000 2 147,000 3 104,000 4 50,400 5 50,400 6 42,000 7 42,000 Total $612,800 (a) Calculate the payback period for the proposed equipment purchase. Assume that all cash ows occur evenly throughout the year. Payback period years and months. (b) If Pronghorn requires a payback period of 4 years or less, should the company make this investment? The com pan '/ make this investment. should not should David's House of Music wants to purchase Transposelt, a system that transposes any song in its database and prints sheet music in the requested key. This system allows singers to obtain sheet music in keys that are suitable to their vocal range. The software for the system costs $11,400; a new computer and a laser printer costing $4,400 will be needed to run the system. David estimates that the system will generate additional annual sales revenue of $24,200 and that annual cash expenditures will be $18,231. David uses straight-line depreciation. The software, computer, and printer will have a useful life of 5 years. The system will have a $175 salvage value at the end of its 5-year useful life. (a) Calculate the annual net operating income generated by the system. Annual net operating income $ Calculate the accounting rate of return of the system. Accounting rate of return % Michael Jones is evaluating two new business opportunities. Each of the opportunities shown below has a 15-year life. Michael uses a 12% discount rate. Option 1 Option 2 Equipment purchase and installation $71,700 $82,540 Annual cash ow $28,200 $30,690 Equipment overhaul in year 6 $4,750 - Equipment overhaul in year 8 - $6,060 Click here to View the factor table. (a) Calculate the net present value of the two opportunities. (Round present value factor calculations to 4 decimal places, e.g. 1.2514 and the nal answers to 0 decimal places, e.g. 59,991.) Option 1 Option 2 Net present value $ $ Calculate the profitability index of the two opportunities. (Round answers to 2 decimal places, e.g. 15.25.) Option 1 Option 2 Profitability Index eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer C) Which option should Michael choose? Michael should chooseGrouper Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $87,000 for the machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a $9,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells 15,000 frames per year, generating a total contribution margin of $84,000. Martson Molders currently sells a molding machine that will allow Grouper Pix to increase production and sales to 20,000 frames per year. The machine, which has a ten-year life, sells for $122,000 and would cost $14,000 per year to operate. Grouper Pix's current machine costs only $8,000 per year to operate. If Grouper Pix purchases the new machine, the old machine could be sold at its book value of $5,000. The new machine is expected to have a salvage value of $20,000 at the end of its ten-year life. Grouper Pix uses straight-line depreciation. Click here to view the factor table. (a) Calculate the new machine's net present value assuming a 11% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round nal answer to 0 decimal place, 2.3. 5 8,97 1.) Net present value $ (b) Use Excel or a similar spreadsheet application to calculate the new machine's internal rate of return. {Round answer to 2 decimal places, e.g. 1.25%.) Internal rate of return % eTextbook and Media Save for Later Attempts: 0 of 3 used (C) Calculate the new machine's payback period. (Round answer to 2 decimal places, 2.3. 1.25.) Payback period years