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The Stop Gap, Inc. is considering the purchase of a copying machine, which it will make available to customers at a per-copy charge. The copying

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The Stop Gap, Inc. is considering the purchase of a copying machine, which it will make available to customers at a per-copy charge. The copying machine has an initial cost of $7,500, an estimated useful life of five years, and an estimated salvage value of $2,500. The estimated annual revenue and expenses relating to operation of the machine are as follows: All revenue will be received in cash; expenses other than depreciation will be paid in cash. Depreciation will be computed by the straight-line method. Compute for this proposal the expected: A. Annual increase in Stop Gap's net income: B. Annual net cash flow: C. Payback period: years D. Return on average investment: E. Net present value (round to the nearest dollar) of the proposed investment, discounted at an annual rate of 15% (Tables show that the present value of $1 to be received in five periods, discounted at 15%, is 0.497 and that the present value of a five-year annuity of $1, discounted at 15%, is 3.352)

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