Cash Payback Period, Net Present Value Analysis, and Qualitative Considerations The plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $284,000. The manager believes that the new investment will result in direct labor savings of $71,000 per year for 10 years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.037 2.855 2.589 3.170 3.791 5 4.212 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. What is the payback period on this project? years b. What is the net present value, assuming a 10% rate of return? Use the table provided above. Round to the nearest whole dollar. Net present value Internal Rate of Return Method for a Service Company The Riverton Company, announced a $702,856 million expansion of lodging properties, ski lifts, and terrain in Park City, Utah. Assume that this investment is estimated to produce $154,000 million in equal annual cash flows for each of the first seven years of the project life. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the expected internal rate of return of this project for seven years, using the present value of an annuity of $1 table above. %