Port Pharmacy is considering the purchase of a copying machine, which it will make available to customers at a per copy 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:
All revenue will be received in cash; expenses other than depreciation will be paid in cash. Depreciation will be computed by the straight line method.
Compute for this proposal the expected:
a) Annual increase in Port's net income: $____________
b) Annual net cash flow: $____________
c) Payback period: ____________ years
d) Return on average investment: ___________ %
e) 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 five year annuity of $1, discounted at 15%, is 3.352): $____________

Question

Port Pharmacy is considering the purchase of a copying machine, which it will make available to customers at a per copy 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:
  All revenue will be received in cash; expenses other than depreciation will be paid in cash. Depreciation will be computed by the straight line method.
Compute for this proposal the expected:
a) Annual increase in Port's net income: $____________
b) Annual net cash flow: $____________
c) Payback period: ____________ years
d) Return on average investment: ___________ %
e) 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 five year annuity of $1, discounted at 15%, is 3.352): $____________

Quizplus · Accepted Answer

The Answer of Port Pharmacy is considering the purchase of a copying machine, which it will make available to customers at a per copy 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:
  All revenue will be received in cash; expenses other than depreciation will be paid in cash. Depreciation will be computed by the straight line method.
Compute for this proposal the expected:
a) Annual increase in Port's net income: $____________
b) Annual net cash flow: $____________
c) Payback period: ____________ years
d) Return on average investment: ___________ %
e) 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 five year annuity of $1, discounted at 15%, is 3.352): $____________

Port Pharmacy Is Considering the Purchase of a Copying Machine