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54 EX 16-34 (Algo) Profitability Index; Taxes (Section 2) (LO 16-7) The owner of Atlantic City Confectionary is considering the purchase of a new
54 EX 16-34 (Algo) Profitability Index; Taxes (Section 2) (LO 16-7) The owner of Atlantic City Confectionary is considering the purchase of a new semiautomatic candy machine. The machine will cost $21,000 and last 9 years. The machine is expected to have no salvage value at the end of its useful life. The owner projects that the new candy machine will generate $3,600 in after-tax savings each year during its life (including the depreciation tax shield). Use Appendix A for your reference. Note: Use appropriate factor(s) from the tables provided. Required: Compute the profitability index on the proposed candy machine, assuming an after-tax hurdle rate of (a) 6 percent, (b) 8 percent, and (c) 10 percent. Note: Round your final answers to 2 decimal places. After-Tax Hurdle Rate Profitability Index (a) 6 percent (b) 8 percent (c) 10 percent
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