The dean of the School of Natural Science is trying to decide whether to purchase a copy machine to place in the lobby of the building. The machine would add to student convenience, but the dean feels compelled to earn an 10 percent return on the investment of funds. Estimates of cash inflows from copy machines that have been placed in other university buildings indicate that the copy machine would probably produce incremental cash inflows of approximately $12,500 per year. The machine is expected to have a three-year useful life with a zero salvage value.
Required:
a.Use Present Value Table 1 in the Appendix to determine the maximum amount of cash the dean should be willing to pay for a copy machine. (Round "PV Factor" to 6 decimal places, intermediate calculations and final answer to 2 decimal places. Omit the "$" sign in your response.)
Maximum amount $
b.Use Present Value Table 2 in the Appendix to determine the maximum amount of cash the dean should be willing to pay for a copy machine. (Round "PV Factor" to 6 decimal places, intermediate calculations and final answer to 2 decimal places. Omit the "$" sign in your response.)
Maximum amount $