A.

A company is considering the purchase of a new machine for $115,560. Management predicts that the machine can produce sales of $25,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $20,800 per year, including depreciation of $6,600 per year. What is the payback period for the new machine?

Multiple Choice

13.80 years.

7.80 years.

10.70 years.

21.80 years.

9.30 years.

B.

A company is planning to purchase a machine that will cost $61,632, have a six-year life, and will have no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the payback period for this machine?

Sales		$ 216,000
Costs:
Manufacturing	$ 129,600
Depreciation on machine	4,000
Selling and administrative expenses	72,000	(205,600)
Income		$ 10,400

Multiple Choice

6.42 years.

12.84 years.

25.68 years.

1.07 year.

4.28 years.