Active Mother manufactures baby furniture, clothing, strollers, and accessories. In the current year the company plans...

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Active Mother manufactures baby furniture, clothing, strollers, and accessories. In the current year the company plans on purchasing a new machine to improve the quality and efficiency of production. Active Mother has prepared estimates of future cash flows over the following four years, at which point it will sell the machine for $12,500. The company focuses on tax minimization and calculated depreciation over the four years using the straight-line method, a useful life of four years, and a residual value of $0. (Click the icon to view the future cash flows.) The NPV of the investment is $44,614. Active Mother has just heard about payback period and IRR. Assume the CCA rate is 20% and refer to the relevant cash flows. Required Future cash flows Requirement 1. Calculate the payback period. (Round your final answer to two decimal places.) The payback period of the investment is 1.13 year(s). Initial investment Annual cash flows from operations (excluding Today Relevant Cash Flows at End of Each year 1 2 3 4 (22,600) depreciation) Cash flow from sale of machine Required return on investment 10% Income tax rate 35% Depreciation method - 27,000 27,000 27,000 27,000 12,500 CCA rate declining balance for income tax purposes Active Mother manufactures baby furniture, clothing, strollers, and accessories. In the current year the company plans on purchasing a new machine to improve the quality and efficiency of production. Active Mother has prepared estimates of future cash flows over the following four years, at which point it will sell the machine for $12,500. The company focuses on tax minimization and calculated depreciation over the four years using the straight-line method, a useful life of four years, and a residual value of $0. (Click the icon to view the future cash flows.) The NPV of the investment is $44,614. Active Mother has just heard about payback period and IRR. Assume the CCA rate is 20% and refer to the relevant cash flows. Required Future cash flows Requirement 1. Calculate the payback period. (Round your final answer to two decimal places.) The payback period of the investment is 1.13 year(s). Initial investment Annual cash flows from operations (excluding Today Relevant Cash Flows at End of Each year 1 2 3 4 (22,600) depreciation) Cash flow from sale of machine Required return on investment 10% Income tax rate 35% Depreciation method - 27,000 27,000 27,000 27,000 12,500 CCA rate declining balance for income tax purposes

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Detailed Explanation The payback period is the time it takes for an investment to generate an amount ... View the full answer