74) Sam's Structures desires to buy a new crane and accessories to help move and install
modular buildings. The machine sells for $75 000 and requires working capital of $10 000.
Its estimated useful life is six years and it will have a salvage value of $17 560. Recovery of
working capital will be $10 000 at the end of its useful life. Annual cash savings from the
purchase of the machine will be $20 000.
a. Compute the net present value at a 12% required rate of return.
b. Compute the internal rate-of-return.
c. Determine the payback period of the investment.
75) There are no questions in this section. 75)
76) Supply the missing data for each of the following proposals:
Proposal A Proposal B Proposal C
Initial investment (a) $75 000 $255 000
Annual net cash inflow $90 000 (c) (e)
Life, in years 10 6 10
Salvage value $0 $10 000 $0
Payback period in years (b) (d) 5.65
Internal rate of return 12% 24% (f)