Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Pique Corporation wants to purchase a new machine for $330,000. Management predicts that the machine can produce sales of $210,000 each year for the next
Pique Corporation wants to purchase a new machine for $330,000. Management predicts that the machine can produce sales of $210,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments. what is the present value payback period, rounded to one-tenth of a year? (Note: PV factors for 10% are as follows: year 1-0.909; year 2 = 0.826; year 3 0.75% year 4-0 683; year 5 = 0.621; the PV annuity factor for 10%, 5 years-3.791 Assume that annual after-tax cash inflows occur at year-end.) 3.6 years 4.0 years 3.0 years. 3.3 years. 2.5 years
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started