The next three questions are based on the following information. Tammy is negotiating for the purchase of equipment that would cost $10,000 with the expectation that could earn cash flows of $2,500 for 8 years. Tammy's predetermined minimum desired rate of return is 6%. Tammy plans to depreciate the equipment straight line method over 8 years of service life, with zero salvage value. The tax rate is 40%. The present value of an annuity of 1 at 6% for 8 periods is below.

a) Compute the payback period before tax

b) Compute the payback period after tax

c) Compute the discounted payback period

Present Value of an Annuity of $1 in Arrears; - 1 - Periods 4% 4% 5% 5% 6% 70% 7% 8% 80% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 0.962 1.886 2.775 3.630 4.452 0.952 0.943 0.935 1.859 1.833 1.808 2.723 2.673 2.624 3.546 3.465 3.387 4.3294212 4.100 0.926 1.783 2.577 3.312 3.993 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 1.759 1.736 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 2.531 2.487 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 5.242 5.076 4.917 6.002 5.786 5.582 6.733 6.463 6.210 7.435 7.108 6.802 8.111 7.722 7.360 8.760 8.306 7.887 9.385 8.863 8.384 9.986 9.394 8.853 10.563 9.899 9.295 11.118 10.380 9.712 11.652 10.838 10.106 4.767 4.623 4.486 4.355 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.6394.487 4.344 4.207 4.078 3.954 3.837 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031 7.024 6.710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 7.943 7.536 7.161 6.814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4,611 4.439 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 9.108 8.559 8.061 7.606 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5954 5.668 5405 5162 4 032 A 720 12 13 14 15 16