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37.) Marc Corporation wants to purchase a new machine for$400,000. Management predicts that the machine will produce salesof $281,000 each year for the next 5 years. Expenses are expectedto include direct materials, direct labor, and factory overhead(excluding depreciation) totaling $81,000 per year. The companyuses MACRS for depreciation. The machine is considered to be a3-year property and is not expected to have any significantresidual value at the end of its useful life. Marc's combinedincome tax rate, t, is 30%. Management requires a minimumafter-tax rate of return of 10% on all investments. A partial MACRSdepreciation table is reproduced below.

Year	3-year property	5-year property
1	33.33	20.00
2	44.45	32.00
3	14.81	19.20
4	7.41	11.52
5		11.52
6		5.76

What is the after-tax cash inflow in Year 1 from the proposedinvestment (rounded to the nearest thousand)?

Multiple Choice

• $72,000.

• $124,000.

• $180,000.

• $250,000.

• $47,000.

38.) Brandon Company is contemplating the purchase of a newpiece of equipment for $40,000. Brandon is in the 40% income taxbracket. Predicted annual after-tax cash inflows from thisinvestment are $17,000, $13,000, $8,000, $4,000 and $6,000 foryears 1 through 5, respectively. The firm uses straight-linedepreciation with no residual value at the end of fiveyears.

Assume that the hurdle rate for accepting new capital investmentprojects for the company is 4%, after-tax. (Note:PV $1 factors for 4% are as follows: for year 1 = 0.962, for year 2= 0.925, for year 3 = 0.889, for year 4 = 0.855, for year 5 =0.822; the PV annuity factor for 4%, 5 years = 4.452.) At anafter-tax discount rate of 4%, the estimated PV (present value)payback period, in years (rounded to two decimal places) is:

Multiple Choice

• 2.84 years.

• 3.45 years.

• 3.84 years.

• 4.22 years.

• More than 5 years.

39.) Western Electronics (WE) is reviewing the following datarelating to a new equipment proposal:

Net initial investment outlay	$	74,000
After-tax cash inflow from disposal of the asset after 5years	$	11,000
Present value of an annuity of $1 at 12% for 5 years		3.605
Present value of $1 at 12% in 5 years		0.567

WE expects the net after-tax savings in cash outflows from theinvestment to be equal in each of the 5 years. What is the minimumamount of after-tax annual savings (including depreciation effects)needed to make the investment yield a 12% return (rounded to thenearest whole dollar)?

Multiple Choice

• $14,689.

• $17,611.

• $18,797.

• $20,389.

• $22,178.

40.) A profitable company pays $95,000 wages and hasdepreciation expense of $80,000. The company's income tax rate,t, is 40%. The after-tax cash flows from these two itemsare calculated as follows:

Multiple Choice

• An after-tax cash outflow of $32,000 for wages, and a cashinflow of $57,000 for depreciation expense.

• An after-tax cash outflow of $32,000 for wages, and a cashinflow of $32,000 for depreciation expense.

• An after-tax cash outflow of $57,000 for wages, and a cashinflow of $57,000 for depreciation expense.

• An after-tax cash outflow of $57,000 for wages, and a cashinflow of $32,000 for depreciation expense.

• An after-tax cash outflow of $32,000 for wages, and a cashinflow of $95,000 for depreciation expense.