Determine the payback reciprocal

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Question - Cesar Company is planning to buy a new machine costing 2,600,000 with a useful life of five years and a 100,000 residual value. Other data were made available:

Expected annual sales revenue 4,600,000

Annual out-of-pocket cost 2,450,000

Income tax rate 40%

Depreciation Method, straight line 500,000

Required -

1. Determine the Payback Period.

2. Determine the Payback Reciprocal.

3. Determine the Accounting rate of return on original investment.

Reference no: EM132826656

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