The Manager of Malan Pty Ltd Wants to Buy a New

question 19

Multiple Choice

The manager of Malan Pty Ltd wants to buy a new machine to replace the one currently being used. The new machine will cost $100 000 with no disposal value at the end of a five-year useful life. The manager estimates that the machine will reduce annual operating costs by $30 000. Depreciation will be $20 000 per year for five years. The tax rate for each year is expected to be 20 per cent and the company has an after-tax hurdle rate of 12 per cent. What is the after-tax payback period of the machine?

• A) 3.33 years
• B) 3.57 years
• C) 4.17 years
• D) 4.55 years

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Definitions:

Job Enlargement

The process of increasing the number and variety of tasks that an individual performs, thereby enhancing job satisfaction by reducing monotony.

Specialized Tasks

Work that requires specific skills or knowledge, often performed by individuals trained or educated in that particular area.

Job Displacement

The loss of employment due primarily to external factors like technological advancements, economic downturns, or organizational restructuring.

Job Specialization

The process of focusing one's career or labor on a specific area of expertise, allowing for greater efficiency and mastery of skills.