1. Zeus Products needs to purchase a new machine. The machine costs $27,000 and will reduce operating costs by $3,500 per year. The company is able to sell their old machine for $4,500. What is the payback period in years? Enter the value with 2 decimals.

Answer:___________

2. A company is deciding if they want to invest $90,000 in a machine that will result in a cost reduction of $20,000 in each of 8 years. The company can earn a rate of return of 12% by investing its money elsewhere. At the end of the 8 years, the machine will have no salvage value. The present value for an annuity for 8 years at 12%. Is 4.968 and the present value for a dollar at 8 years and 12% is 0.404. What is the net present value of the investment?

Answer:___________

3. When a company makes a capital budgeting decision, all of the following would be examples of questions they would ask except:
   1. Should we purchase a new facility to increase production?
   2. Should we purchase a new machine to reduce costs?
   3. Should we purchase or lease a new machine?
   4. Should we purchase more raw material to increase production?

4. Which of the following statements is incorrect related to net present value?
   1. If a net present is positive, then the project should be accepted
   2. If a net present value is negative, then the project should be rejected
   3. If a net present value is positive, the return is greater than the required rate of return
   4. If a net present value is negative, the required rate of return is less than the return

5. If a $200,000 investment has a project profitability index of 0.30, what is the net present value of the project?
   1. $30,000
   2. $170,000
   3. $140,000
   4. $60,000

6. Zora Manufacturing needs to purchase a new machine. The machine costs $12,000 and will reduce operating costs by $4,000 per year. The company is able to sell their old machine for $1,500. What is the payback period, rounded to the nearest 2 decimals?
   1. 3 years
   2. 2.63 years
   3. 5.33 years
   4. 8 years

7. A company is deciding if they want to invest $40,000 in a machine that will result in a cost reduction of $7,000 in each of 10 years. The company can earn a rate of return of 10% by investing its money elsewhere. At the end of the 10 years, the machine will have no salvage value. The present value of an annuity for 10 years at 10% is 6.145 and the present value of a dollar at 10 years at 10% is 0.386. What is the net present value of the investment?
   1. $30,000
   2. -$12,980
   3. $3,015
   4. None of the choices listed