Sad Company is considering the purchase of a new machine that would cost $80,000. The machine would have a useful life of 8 years. Sad Company plans on using straight-line depreciation with an estimated salvage value of $0. Sad Company has a hurdle rate of 12% and is subject to an income tax rate of 80%. The annual cash income is estimated to be $50,000.

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

1. 10 %
2. 11 %
3. 12 %
4. 9 %
5. 8 %

1. The Net Present Value (NPV) is:

1. $10,424
2. $9,424
3. $11,424
4. $8,424
5. $11,424

1. The Profitability Index (PI) is:

1. 1.02
2. 1.12
3. 1.22
4. 0.92
5. 0.82

1. The Payback period is:

A. 4.044 years

B. 4.144 years

C. 4.244 years

D. 4.344 years

E. 4.444 years

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

1. 14.4 %
2. 13.4 %
3. 12.4 %
4. 15.4 %
5. 16.4 %