. Payback Method. Hanley Company purchased a machine for ($ 125,000) and will depreciate it on a...

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. Payback Method. Hanley Company purchased a machine for $\$ 125,000$ and will depreciate it on a straight-line basis over a 5 -year period with an aftertax salvage value of $\$ 15,000$. The related cash operating savings, before income taxes, are expected to be $\$ 50,000$ a year.

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1. Find the payback period ignoring taxes.

2. Assume that Hanley's effective income tax rate is 40 percent and that salvage value is ignored when calculating depreciation. What is the payback period?

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