1. The Hilltop Corporation is considering (as of 1/1/08) the replacement of an

1. The Hilltop Corporation is considering (as of 1/1/08) the replacement of an old machine that is currently being used. The
old machine is fully depreciated but can be used by the corporation through 2011. If Hilltop decides to replace the old machine Baker Company has offered to
purchase it for $50000 on the replacement date. The disposal value of the old machine would be zero at the end of 2011.

If the replacement occurs a new machine would be acquired from Busby Industries on January 2 2008. The purchase price of $500000 for the
new machine would be paid in cash at the time of replacement. Due to the increased efficiency of the new machine estimated annual cash savings of $150000
would be generated through 2011 the end of its expected useful life. The new machine is expected to have a zero disposal price at the end of 2011.

If Hilltop requires investments to earn an 8 percent return the net present value for replacing the old machine with the
new machine is?

Referring to above problem the payback period to replace the old machine with the new machine
is

a. 3.3 years. b. 3.0 years. c. 4.0 years. d. 2.5 years

2. A company is contemplating the purchase of a new machine that will cost $31500 and generate additional
revenues of $23250 a year. Additional costs other than depreciation will be $12000 a year. The estimated life of the machine will be 7 years and there
will be no salvage value.

What is the ARR?

3. Lamar Company is studying a project that would have an eight year life and require a $1600000
investment in equipment. At the end of the eight years the project would terminate and the equipment would have no salvage value. Below are estimates of the
annual revenues and costs associated with the project for the eight-year period.

Estimate annual sales revenue $3M

Estimated annual variable costs 60% of sales revenue

Estimated annual fixed costs $700000

The straight-line depreciation method would be used.

The company requires an ARR of at least 18% on all investments.

What is the ARR for this investment?

4.More Toppings Inc. is considering the purchase of a new oven in their pizzaria. It will cost $105000 and generate
annual cash inflows of $15000.
What is the payback period

(PLEASE SHOW WORK AND HOW THE PROBLEM WAS FIGURED)

PLEASE LET ME KNOW IF YOU NEED THE NPV PERIOD OR PERCENTAGE AMOUNTS