Tressor Company is considering a 5-year project. The company plans to invest $90,000 now, and it forecasts cash flows for each year of $27,000. The company requires that investments yield a discount rate of at least 14%. Selected factors for a present value of an annuity of $1 for five years are shown below:

Interest rate	Present value of an annuity of $1 factor for year 5
10%	3.7908
12%	3.6048
14%	3.4331

Calculate the internal rate of return to determine whether it should accept this project.

Multiple Choice

• The project should be accepted because it will earn more than 14%.

• The project should be accepted because it will earn more than 10%.

• The project will earn more than 12% but less than 14%. At a hurdle rate of 14%, the project should be rejected.

• The project should be rejected because it will earn less than 14%.

• The project should be rejected because it will not earn exactly 14%.

A new manufacturing machine is expected to cost $277,200, have an eight-year life, and a $30,000 salvage value. The machine will yield an annual income of $35,000. Annual depreciation expense is $31,000 per year. Compute the payback period for the purchase.

Multiple Choice

• 8.7 years.

• 3.8 years.

• 4.2 years.

• 7.3 years.

• 5.4 years.