HUGZ Company

HUGZ Company is considering purchasing a machine for $420,000. The machine has a useful life of 8 years and a salvage value of $12,000. The company uses straight-line depreciation. The new machine will generate an after-tax net income of $16,000 per year. Assume all revenues are received in cash and all costs, except depreciation, are out-of-pocket.

Required:

1. Calculate the annual depreciation on the machine. (Enter as a whole number with no commas, no decimal, no dollar sign)

2. Calculate the payback period for the new machine. (Enter as a number rounded to 2 decimal places - Example: 1.10)

3. Calculate the accounting rate of return. (enter as a percent rounded to 2 decimal places - Example - 1.00 WITHOUT the % sign)

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