90.2K

Verified Solution

Link Copied!

Port Pharmacy is considering the purchase of a copying machine, which it will make available to customers at a percopy charge. The copying machine has an initial cost of $8,500, an estimated useful life of five years, and an estimated salvage value of $2,500. The estimated annual revenue and expenses relating to operation of the machine are as follows:

Revenue...................................................................................................................... $9,000

Expenses other than depreciation................................................................................... $5,500

All revenue will be received in cash; expenses other than depreciation will be paid in cash. Depreciation will be computed by the straightline method.

Compute for this proposal the expected:

a Annual increase in Ports net income: $____________

a Annual net cash flow: $____________

b Payback period: ____________ years

c Return on average investment: ___________ %

d Net present value (round to the nearest dollar) of the proposed investment, discounted at an annual rate of 15% (Tables show that the present value of $1 to be received in five periods, discounted at 15%, is 0.497 and that the present value of a fiveyear annuity of $1, discounted at 15%, is 3.352): $____________

Answer & Explanation Solved by verified expert

See Answer