A company, Innovate Tools Ltd., is considering purchasing a new machine for $500,000. The machine has a useful life of 8 years and will have no salvage value at the end of its useful life. The company expects the machine to generate an additional $120,000 in net cash inflows annually. The company's cost of capital is 10%. Calculate the following: 1. Annual depreciation expense (using straight-line method). 2. Net present value (NPV) of the machine using the company's cost of capital. 3. Payback period for the machine. 4. Internal Rate of Return (IRR).

The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?

Taos Productions bought a piece of equipment for $79,860 that will last for 5 years. The equipment will generate net operating cash flows of $20,000 per year and will have no salvage value at the end of its life. What is the internal rate of return?

Cinemar Productions bought a piece of equipment for $55,898 that will last for 5 years. The equipment will generate net operating cash flows of $14,000 per year and will have no salvage value at the end of its life. What is the internal rate of return?