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The owner of Atlantic City Confectionary is considering the purchase of a new semiautomatic candy...

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Finance

The owner of Atlantic City Confectionary is considering the purchase of a new semiautomatic candy machine. The machine will cost $27,000 and last 8 years. The machine is expected to have no salvage value at the end of its useful life. The owner projects that the new candy machine will generate $3,600 in after-tax savings each year during its life (including the depreciation tax shield).

Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)

Required:

Compute the profitability index on the proposed candy machine, assuming an after-tax hurdle rate of: (a) 4 percent, (b) 6 percent, and (c) 8 percent. (Round your final answers to 2 decimal places.)

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Profitability Index (a) 4 percent (b) 6 percent (c) 8 percent

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