Chapter 12 (Payback and Net Present Value Methods Only) 15. A company is considering the purchase of a new machine that costs $50,000 and is expected to reduce operating costs by $10,000 per year. These reductions in cost will occur evenly throughout the year. 1What is the payback period for this machine, in years? Show your calculations. 1?. An investment project has a net present value of 5500. Using the general decision rule for the net present value method, what conclusion should be made about this project? Use the following information to answer questions 13-20: A company has $33,000 to invest in either Project X or Project '1'. The company's required rate of return {discount rate) is 5%. The following data are available on these projects: Project X Project 'r' Investment required Annual cash inflows Life ofthe project 18. What is the net present value of Project X? Show your calculations. {Present value tables are provided at the end of this document] 19. What is the net present value of Project Y? Show your calculations. 20. Which project, if any, should the company accept, and why? 21. If a net present value problem states the project "would reduce operating costs by $X per year" or have "annual cost savings of $X," how should you treat this item in your calculations? 22. If a net present value problem states the equipment "would have a salvage value of $X," how should you treat this item in your calculations? Page 4 23. A company has provided the following information for a proposed investment project: Discount rate 5% Life of the project 5 years Initial investment cost $20,000 Annual cost savings $ 4,000 Salvage value $ 2,000 What is the net present value of the proposed investment project? Show your calculations. (2 points)