Use the present value of an annuity of 1 table shown below for any of the next questions that need present value calculations. Show your computations for each question in the areas provided either on the side or below each question. Present Value of an Annuity of 1 Periods 6% 8% 9% 10% 12% 14% 1 .943 926 2 1.833 1.783 .917 .909 1.759 1.736 .893 .877 3 2.673 2.577 2.531 2.486 4 3.465 3.312 3.240 3.170 1.690 2.402 2.322 3.037 1.647 2.914 10 7.360 6.710 6.418 6.145 5.650 5.216 1. Sutton Co. has a minimum required rate of return of 8%. The company is considering investing in a factory machine which costs $75,000 and has an expected life of 3 years. The machine has a zero salvage value and will be depreciated using the straight-line depreciation method. The company expects to generate an extra $5,000 of net income each of the next 3 years because of this new factory machine and extra annual cash flows of $30,000 each of the 3 years the asset will be used. Show the calculations you use under each area below. a. Show how the $30000 annual cash flow was computed from the $5,000 net income figure. In other words, if you were given the $5,000 net income but not the $30,000 cash flow amount, how would you compute it? b. Compute the present value of the cash receipts. $ c. What is the net present value of the investment in the factory machine? $ d. Is the net present value a negative or positive value? 2. Sutton Co. has provided the following data concerning an investment project that it is considering: Initial investment $ 550,000 Working capital requirement at the beginning $ 40,000 Annual cash flow $ 220,000 per year Salvage value at the end of the project S 20,000 Expected life of the project 3 years Discount rate 10% The present value of $1 factors at 10% for year 1, year 2, and year 3 are: The present value of an annuity of $1 factors are shown in a table on page 1. The working capital would be released for use elsewhere at the end of the project. a. What is the net present value of the project? $ b. Is it a positive or negative number? Show the numbers on the side to calculate the net present value. .909 .826 .751