1. A production machine costs $40,000 and has a 7-year useful life. At the end of 7 years, it can be sold for $10,000. If interest is 10% compounded quarterly, what is the equivalent annual cost of ownership of this machine over its useful life?
2. A firm purchased some equipment at a very favorable price of $30,000. The equipment reduced costs by $1000 per year during 8 years of use. After 8 years, the equipment was sold for $40,000. Assuming interest at 9%, compute the equivalent uniform annual cost?
3. A hospital is considering an investment project, which has the following cash flows: Year Cash Flow 0 -$1,000 1 400 2 300 3 500 4 400 The company’s cost of capital is 10 percent. What is the project’s payback, internal rate of return, and net present value? What do these metrics tell you about this proposed project?