4.

A machine can be purchased for $248,000 and used for five years, yielding the following net incomes. In projecting net incomes, double-declining depreciation is applied using a five-year life and a zero salvage value.

	Year 1				Year 2				Year 3				Year 4				Year 5
Net income		$	16,000			$	41,000			$	68,000			$	56,500			$	139,000

Compute the machines payback period (ignore taxes). (Round payback period answer to 3 decimal places.)

Computation of Annual Depreciation Expense
Year	Beginning Book Value	Annual Depr. (40% of Book Value)	Accumulated Depreciation at Year-End	Ending Book Value
1
2
3
4
5
Annual Cash Flows
Year	Net income	Depreciation	Net Cash Flow	Cumulative Cash Flow
0	$(248,000)			$(248,000)
1	16,000
2	41,000
3	68,000
4	56,500
5	139,000
Payback period =					years