Question 3 Bettina Shoe Co manufactures boots. The company is considering purchasing a new machine for S320,000. This new machine is expected to be able to replace 10 workers. It has been increasingly difficult for Bettina to attract and retain their workers. The average age of Bettina's current workforce is close to 60 vears. Many of Bettina's workers are due for retirement in a couple of years The management believes that the machine can produce sales of $190,000 each year for the next 5 years. Expenses are expected to include direct material, direct labour, and factory overhead (excluding depreciation) totalling $80,000 per year. The firm uses a straight-line depreciation method over 5 years with no residual value for all its fixed assets. The depreciation method used is the same for both accounting and tax purposes Bettina's effective tax rate is 20%. Management requires a minimum rate of return of 10% on all investments Required: (a) One criticism of using the payback period method is that time value of money is not considered. However, this issue can be resolved by using discounted cash flows to compute payback period Compute the new machine's payback period using net discounted cash flows (give your answer to the nearest one-tenth of a year). Assume that annual cash flows occur at the end of the vear (Note: PV factors for 1090 are as follows: Year 1-0.909: Year 2-0.826; Year 3-0.751 : Year 4-0.683: Year 5-0.621: the PV annuity factor for 10%, 5 years (12 marks) (b)Compute the expected accounting rate of return (before taxes) on average -3.791) investment for the new machine purchase. Does the rate meet Bettina's (5 marks) (c)Discuss two (2) qualitative factors that Bettina should consider before purchasing (6 marks) (Total: 23 marks) investment objective? the new machine