If the discount rate is 12 the net present value of the

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Baldock Inc. is considering the acquisition of a new machine that costs $420,000 and has a  useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are:

 

Incremental Net

Incremental Net

 

Operating Income

Cash Flows

Year 1

$61,000

$145,000

Year 2

$67,000

$151,000

Year 3

$78,000

$162,000

Year 4

$41,000

$125,000

Year 5

$83,000

$167,000

1. If the discount rate is 12%, the net present value of the investment is closest to:

A) $330,000

B) $539,365

C) $119,365

D) $420,000

2. The payback period of this investment is closest to:

A) 5.0 years

B) 3.2 years

C) 1.9 years

D) 2.8 years

Reference no: EM13567217

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