Beyer Company is considering the purchase of an asset for $250,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows $ 50,000 $ 36,000 $ 60,000 $ 130,000 $ 24,000 $ 300,000 Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your payback period to 2 decimal places.)

Beyer Company is considering the purchase of an asset for $250,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year.

	Year 1				Year 2				Year 3				Year 4				Year 5				Total
Net cash flows		$	50,000			$	36,000			$	60,000			$	130,000			$	24,000			$	300,000

Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your payback period to 2 decimal places.)

	Annual Net Cash Flows				Cumulative Cash Flows
Year 1		$	50,000			$	-200,000
Year 2			36,000				-164,000
Year 3			60,000				-104,000
Year 4			130,000				26,000
Year 5			24,000				50,000

Cost of investment	$	250,000
Paid back in years 1-3		-104,000
Paid back in year 4	$	104,000

		Amount paid back in year 4		$104,000
Part of year	=		=		=	0.80
		Net cash flow in year 4		$130,000

Payback period = 3 + 0.80 = 3.80 years, (or nearly 3 years and 9 months)

The management of Opry Company, a wholesale distributor of suntan products, is considering

The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $25,000 machine that would reduce operating costs in its warehouse by $4,000 per year. At the end of the machine’s 10-year useful life, it will have no scrap value. The company’s required rate of return is 12%. (Ignore income taxes.)

Click here to view Exhibit 13B-2, to determine the appropriate discount factor(s) using table.

    

Required:
1.	Determine the net present value of the investment in the machine. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

  

Net present value

$ -2,399

    

2.	What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Omit the "$" sign in your response.)

  

Net cash flow

$ 15,000