TB MC Qu. 12-83 (Algo) Estimated PV (present value) payback period: Plant Company Plant Company is contemplating the purchase of a new piece of equipment for $47,000. Plant is in the 30% income tax bracket. Predicted annual after-tax cash inflows from this investment are $20,000, $10,000, $12,000, $7,000 and $5,000 for years 1 through 5, respectively. The firm uses straight-line depreciation with no residual value at the end of five years. Assume that the hurdle rate for accepting new capital investment projects for the company is 4%, after-tax. (Note: PV $1 factors for 4% are as follows: for year 1 = 0.962, for year 2 = 0.925, for year 3 = 0.889, for year 4 = 0.855, for year 5 = 0.822; the PV annuity factor for 4%, 5 years = 4.452.) At an after-tax discount rate of 4%, the estimated PV (present value) payback period, in years (rounded to two decimal places) is: Multiple Choice 3.07 years. 3.68 years. 4.07 years. 4.45 years. More than 5 years. Hammer Corporation wants to purchase a new machine for $298,000. Management predicts that the machine will produce sales of $205,000 each year for the next 4 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $72,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Hammer's combined income tax rate, t, is 50%. What is the estimated accounting (book) rate of return (ARR) for the proposed investment, based on average investment? (Round answer to nearest whole number/percentage.) Multiple Choice 8%. 10%. 13%. 20%. 30%