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Read Publishing is considering the purchase of a used printing press costing $84,200. The printing press would generate a net cash inflow of $37,422 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company’s cost of capital is 10 percent. The company uses straight-line depreciation. The present value factors of an annuity of $1.00 for different rates of return are as follows:

Read Publishing is considering the purchase of a used printing press costing $84,200. The printing press would generate a net cash inflow of $37,422 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company’s cost of capital is 10 percent. The company uses straight-line depreciation. The present value factors of an annuity of $1.00 for different rates of return are as follows:

Cost of Capital Period 8% 10% 12% 14% 16% 2 1.78 1.74 1.69 1.65 1.61 3 2.58 2.49 2.40 2.32 2.25 4 3.31 3.17 3.04 2.91 2.80

Cost of Capital Period 8% 10% 12% 14% 16% 2 1.78 1.74 1.69 1.65 1.61 3 2.58 2.49 2.40 2.32 2.25 4 3.31 3.17 3.04 2.91 2.80

Cost of Capital

Cost of Capital

Cost of Capital

Period 8% 10% 12% 14% 16%

Period

Period

Period

8%

8%

8%

10%

10%

10%

12%

12%

12%

14%

14%

14%

16%

16%

16%

2 1.78 1.74 1.69 1.65 1.61

2

2

1.78

1.78

1.74

1.74

1.69

1.69

1.65

1.65

1.61

1.61

3 2.58 2.49 2.40 2.32 2.25

3

3

2.58

2.58

2.49

2.49

2.40

2.40

2.32

2.32

2.25

2.25

4 3.31 3.17 3.04 2.91 2.80

4

4

3.31

3.31

3.17

3.17

3.04

3.04

2.91

2.91

2.80

2.80

The investment’s net present value is:

$ 5,480 $ 19,200 $ 76,800 $ 8,981

$ 5,480

$ 19,200

$ 76,800

$ 8,981

Read Publishing is considering the purchase of a used printing press costing $84,200. The printing press would generate a net cash inflow of $37,422 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company’s cost of capital is 10 percent. The company uses straight-line depreciation. The present value factors of an annuity of $1.00 for different rates of return are as follows:

Read Publishing is considering the purchase of a used printing press costing $84,200. The printing press would generate a net cash inflow of $37,422 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company’s cost of capital is 10 percent. The company uses straight-line depreciation. The present value factors of an annuity of $1.00 for different rates of return are as follows:

Cost of Capital Period 8% 10% 12% 14% 16% 2 1.78 1.74 1.69 1.65 1.61 3 2.58 2.49 2.40 2.32 2.25 4 3.31 3.17 3.04 2.91 2.80

Cost of Capital Period 8% 10% 12% 14% 16% 2 1.78 1.74 1.69 1.65 1.61 3 2.58 2.49 2.40 2.32 2.25 4 3.31 3.17 3.04 2.91 2.80

Cost of Capital

Cost of Capital

Cost of Capital

Period 8% 10% 12% 14% 16%

Period

Period

Period

8%

8%

8%

10%

10%

10%

12%

12%

12%

14%

14%

14%

16%

16%

16%

2 1.78 1.74 1.69 1.65 1.61

2

2

1.78

1.78

1.74

1.74

1.69

1.69

1.65

1.65

1.61

1.61

3 2.58 2.49 2.40 2.32 2.25

3

3

2.58

2.58

2.49

2.49

2.40

2.40

2.32

2.32

2.25

2.25

4 3.31 3.17 3.04 2.91 2.80

4

4

3.31

3.31

3.17

3.17

3.04

3.04

2.91

2.91

2.80

2.80

The investments internal rate of return (rounded to the nearest percent) is:

10% 16% 14% 12% Urbana Corporation is considering the purchase of a new machine costing $75,000. The machine would generate net cash inflows of $24,214 per year for 5 years. At the end of 5 years, the machine would have no salvage value. Urbana’s cost of capital is 12 percent. Urbana uses straight-line depreciation. The investment’s accounting rate of return (rounded to three decimal points) on initial investment is: 12.285 percent 10.270 percent 30.545 percent 81.613 percent The investment’s payback period in years (rounded to two decimal points) is: 3.30 3.10 4.00 9.48

10%

16%

14%

12%

Urbana Corporation is considering the purchase of a new machine costing $75,000. The machine would generate net cash inflows of $24,214 per year for 5 years. At the end of 5 years, the machine would have no salvage value. Urbana’s cost of capital is 12 percent. Urbana uses straight-line depreciation. The investment’s accounting rate of return (rounded to three decimal points) on initial investment is:

12.285 percent

10.270 percent

30.545 percent

81.613 percent

The investment’s payback period in years (rounded to two decimal points) is:

3.30

3.10

4.00

9.48