The Logan Publishing Corporation is contemplating the acquisition of a state of the art printing press.The following information is relevant:
The cost of the printing press is

\$ 180,000

The anticipated revenue from the printing press is

\$ 120,000

per year. The useful life of the car washis 12 years.
Anmul operating costs are expected to be:

\begin{array}{ll}\text { Salaries } &\$ 40,000 \\\text {Utilities } & 10,000 \\\text { Power usage } &4,600\\\text { Supplies } & 6,400\\\text { Repars/maintenance} &12,000\\\end{array}

The firm uses straight-line depreciation
The salvage value for the car wash is zero.
The company's cutdf points are as follows:

\begin{array}{ll}\text { Payback } &4years \\\text {Accounting rate of return } & 16 \% \\\\text { Internal rate of retune } &16\%\\\\end{array}

Ignore income taxes.
Required:
a.

\text { Compute the annual cash inflow }

\text { Compute the net present value }

\text { Compute internal rate of retun }

\text { Compute the payback period }

\text { Compute the profitability index }

\text { Should the printing press be purchased. }

When Using One of the Discounted Cash Flow Methods to Evaluate

Multiple Choice

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