ABC Company is considering the purchase of a new machine that would cost $500,000.The machine would have a useful life of 10 years.ABC Company plans on using straight-line depreciation with an estimated salvage value of $0.ABC Company has a hurdle rate of 10% and is subject to an income tax rate of 40%.The annual cash income is estimated to be $125,000.

1.The Accounting Rate of Return (AROR) is:

A.7%

B.8%

C.9%

D.10%

2.The Net Present Value (NPV) is:

A.$63,775

B.$73,775

C.$83,775

D.$93,775

3.The Profitability Index (PI) is:

A.1.17

B.1.27

C.1.37

D.1.47

4.The Payback period is:

A. 5.263 years

B. 6.263 years

C. 7.263 years

D. 8.263 years

5.Using interpolation, the Internal Rate of Return (IRR) is:

A.10.78%

B.11.78%

C.12.78%

D.13.78%