1 What should a company do if the net present value (NPV) of an investment in a labor saving machine is negative A Buy the machine B Dont buy the machine 2 IRR Internal Rate of Return Under which of the following circumstances would a company decide to buy the machine being considered A Buy the machine, if the IRR is greater than zero B Buy the machine, if the IRR is greater than the NPV (net present value) C Buy the machine, if the IRR is less than our cost of capital D Buy the machine, if the IRR is greater than our cost of capital 3 The cost of the machine is $200,000 It has a useful life of 5 years It saves us $50,000 annually in labor costs We estimate a salvage value of $10,000 Our cost of capital (discount rate) is 7 Based on these facts, calculate the machines payback period A Payback is never acieved B 4 years C 5 years

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Question: 1.What should a company do if the net present value (NPV) of an investment in a labor-saving machine is negative? A. Buy the machine B.

1.What should a company do if the net present value (NPV) of an investment in a labor-saving machine is negative?

A. Buy the machine


	B.	Dont buy the machine

2. IRR = Internal Rate of Return. Under which of the following circumstances would a company decide to buy the machine being considered?

A. Buy the machine, if the IRR is greater than zero


	B.	Buy the machine, if the IRR is greater than the NPV (net present value)
		C. Buy the machine, if the IRR is less than our cost of capital
		D. Buy the machine, if the IRR is greater than our cost of capital

3. The cost of the machine is $200,000. It has a useful life of 5 years. It saves us $50,000 annually in labor costs. We estimate a salvage value of $10,000. Our cost of capital (discount rate) is 7%. Based on these facts, calculate the machines payback period. A. Payback is never acieved B. 4 years C. 5 years

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