MANAGERIAL ACCOUNTING HANDOUT PROBLEM 13 Name Section Problem (10 points). Timpani Company wants to buy a machine to be used in producing parts for sale to companies that manufacture industrial equipment. The cost of the machine will be $3,500,000. The equipment will last five years with a $200,000 expected salvage value. The expected cash flows from the machine are attached The company uses the straight line method to depreciate its assets. The company has an average tax rate of 30%. Management of the company will not invest in any project unless they can eam an after tax rate of return of 10% and the project must pay back its initial investment after taxes in 3.25 years or less. REQUIRED: (1) Calculate the after tax accounting rate of return on average investment for this machine. Round your percentage answer to two decimal places (four decimal places in all). Show supporting calculations. Calculate the after tax payback period for this machine. Round your answer to two decimal places. Show supporting calculations Calculate the after tax net present value for this machine. Round your answer to the nearest whole dollar. Show supporting calculations Should the company purchase the machine? Provide an adequate explanation for your answer. 2 TIMPANI COMPANY DATA FOR CAPITAL BUDGETING INVESTMENT ANALYSIS Year Cash Revenues Cash Expenses S 3,500,000 S 2,500,000 3 ,750,000 3,150,000 4,000,000 3,000,000 4,000,000 3,200,000 3,500,000 2,800,000