Pique Corporation wants to purchase a new machine for $378,000. Management predicts that the machine can produce sales of $226,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labour, and factory overhead (excluding depreciation) totalling $76,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments. What is the present value payback period (rounded to one-tenth of a year)? Note: PV factors for 10% 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 = 3.791 (Assume that the cash inflows occur at year end)
Pique Corporation wants to purchase a new machine for $378,000. Management predicts that the machine can produce sales of $226,000
each year for the next 5 years. Expenses are expected to include direct materials, direct labour, and factory overhead (excluding
What is the present value payback period (rounded to one-tenth of a year)?
Note: PV factors for 10% 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
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