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 8 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 ma- chine would probably produce incremental cash inflows of approximately $15,000 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 chapter's Appendix to determine the maximum amount of cash the dean should be willing to pay for a copy machine.
b.Use Present Value Table 2 in the chapter's Appendix to determine the maximum amount of cash the dean should be willing to pay for a copy machine.