10 points QUE S TION 7 A piece of machinery has an initialco

10 points QUE S TION 7 A piece of machinery has an initial:cost of $70,000, M&O; costs of $2,000 per year, revenue of $12,000 per year, and an indefinite life. If MARR 896, the machine will pay for itself in approximately how many years? 0 a, 11 years O b. 9 years O C 10 years (O d. 8 years e None of these numerical values QUESTION 8 10 pointss AT&T; sold $2 Billion in bonds to help fund the tion of DirectTV. The nominal vearhr int

Solution

Answer is a. 11 years Payback period Year Cash flows PVF @ 8% Present value Cumulative CF 0 -70000 1 -70,000 -70000 1 10000 0.925926 9,259 -60,741 2 10000 0.857339 8,573 -52,167 3 10000 0.793832 7,938 -44,229 4 10000 0.73503 7,350 -36,879 5 10000 0.680583 6,806 -30,073 6 10000 0.63017 6,302 -23,771 7 10000 0.58349 5,835 -17,936 8 10000 0.540269 5,403 -12,534 9 10000 0.500249 5,002 -7,531 10 10000 0.463193 4,632 -2,899 11 10000 0.428883 4,289 1,390 Payback period: 10 years + 2899 /4289 =10.68 years