12. 3

Pique Corporation wants to purchase a new machine for $280,000. Management predicts that the machine can produce sales of $180,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $81,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 50%. Management requires a minimum after-tax rate of return of 11% on all investments. What is the payback period for the new machine (rounded to nearest one-tenth of a year)? Assume that the cash inflows occur evenly throughout the year) Multiple Choice 3.0 years 3.2 years