Global Justice Corporation (GJC) wants to purchase a new machine for $384,000. Management predicts that the machine can produce sales of $228,000 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. GJC'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? 2.5 years. 4.0 years. 3.0 years. 3.6 years. 3.3 years.
Global Justice Corporation (GJC) wants to purchase a new machine for $384,000. Management predicts that the machine can produce sales of $228,000 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. GJC'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? 2.5 years. 4.0 years. 3.0 years. 3.6 years. 3.3 years.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Global Justice Corporation (GJC) wants to purchase a new machine for $384,000.
Management predicts that the machine can produce sales of $228,000 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. GJC'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?
2.5 years.
4.0 years.
3.0 years.
3.6 years.
3.3 years.
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