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Sad Company is considering the purchase of a new machine that would cost $80,000. The...

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Accounting

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. PV .

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

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

2-The Net Present Value (NPV) is:

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

3-The Profitability Index (PI) is:

  1. 1.02
  2. 1.12
  3. 1.22
  4. 0.92
  5. 0.82
  6. 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 %

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