Sad Company is considering the purchase of a new machine that would cost $80,000. The...
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Accounting
Sad Company is considering the purchase of a new machine that would cost $80,000. The machine would have a useful life of 8 years. Sad Company plans on using straight-line depreciation with an estimated salvage value of $0. Sad Company has a hurdle rate of 12% and is subject to an income tax rate of 80%. The annual cash income is estimated to be $50,000.
The Accounting Rate of Return (AROR) is:
10 %
11 %
12 %
9 %
8 %
The Net Present Value (NPV) is:
$10,424
$9,424
$11,424
$8,424
$11,424
The Profitability Index (PI) is:
1.02
1.12
1.22
0.92
0.82
The Payback period is:
A. 4.044 years
B. 4.144 years
C. 4.244 years
D. 4.344 years
E. 4.444 years
Using interpolation, the Internal Rate of Return (IRR) is:
14.4 %
13.4 %
12.4 %
15.4 %
16.4 %
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