1.What is the paycheck period for a 20,000 project that is expected to return 6,000 per year
for the first two years and 3,000 per year for years three through five?
Cumulative Cash Flow yr1. 6,000 yr2. 12,000 yr3. 15,000 yr4. 18,000 yr5. 21,000
Payback = 4 + (2,000 / 3,000) = 4.67 years
2.Rymer, Inc. is considering a new assembler, which costs 180,000 installed, and has a
depreciable life of 5 years. The expected annual after tax cash flows for the assembler are
60,000 in each of the 5 years and nothing thereafter. Calculate the net present value(npv) of
the assembler if the required rate of return is 14 percent. Round to the nearest ten dollars.
60,000 = PMT 5 = N 14 = I Compute for PV = 205,984.86
After subtracting the 180,000 cost, the NPV = 205,984.86 - 180,000 = 25,984.86
3. An old machine wa spurchsed for 20,000, at a book value of 5,000, and sold for 9,000. The
firm's marginal tax rate is 25%. What is the amount of taxes due?
Taxes are due on the price sold for minus the book value.