38. The traditional payback period is a. over 5 years. b. 2.23 years. c. 1.65 years d. 2.83 years 27. Lady Company has a payback goal of 3 years on new equipment acquisitions. A new sorter is being evaluated that costs P450,000 and has a 5-year life. Straight-line depreciation will be used; no salvage is anticipated. Lady is subject to a 40%% income tax rate. To meet the company's payback goal, the sorter must generate reductions in annual cash operating costs of a. P 60,000. b. P100,000. c. P150,000. d. P190,000. 19. Ignoring the time value of money, how long will it take Harry to recover the amount of investment? a. 3.5 years. b. 4.0 years. c. 4.2 years. d. 5 years. 20. What is the payback reciprocal for the fleet of trucks? a. 29% b. 25% c. 24% d. 20% 21. Assume the net cash flow to be P130,000 a year. What is the payback time for the fleet of trucks? a. 3 years. b. 3.15 years c. 3.85 years. d. 4 years. 22. Westlife Co. is considering the acquisition of a new, more efficient press. The cost of the press is P360,000, and the press has an estimated 6-year life with zero salvage value. Westlife uses the straight-line depreciation for both financial reporting and income tax reporting purposes and has a 40% corporate income tax rate. In evaluating equipment acquisitions of this type, Westlife uses a goal of a 4-year payback period. To meet Westlife's desired payback period, the press must produce a minimum annual before-tax operating cash savings of a. P90,000. b. P110,000. c. P114,000. d. P150,000. 23. Duchess Inc. is expanding its manufacturing plant, which requires an investment of P4 million in new equipment and plant modifications. Duchess sales are expected to increase by P3 million per year as a result of the expansion. Cash investment in current assets averages 30% of sales: accounts payable and other current liabilities are 10% of sales. What is the estimated total investment for this expansion? a. P3.4 million. b. P4.3 million. c. P4.6 million. d. P4.9 million. 36. The accounting rate of return based on the average investment is a. 84.9%. b. 34.4%. c. 40.8 % d. 12% 6. Cruzer Corporation is expanding its plant, which requires an investment of P8 million in new equipment. Cruzer's sales are expected to increase by P6 million per year as a result of the expansion. Cash investment in current assets averages 30% of sales, and accounts payable and other current liabilities are 10% of sales. What is the estimated total cash investment for this expansion? a. P6.8 million. b. P8.6 million. c. P9.2 million. d. P9.8 million.