A company is considering purchasing a machine for $27,500. The machine will generate an after-tax net income of $3,300 per year. Annual depreciation expense would be $2,800. What is the payback period for the new machine?

8.33 years.

8.64 years.

8.64 years.

9.82 years.

4.51 years.

A company is considering the purchase of a new piece of equipment for $102,000. Predicted annual cash inflows from this investment are $40,800 (year 1); $34,000 (year 2); $20,400 (year 3); $14,400 (year 4); and $7,200 (year 5). The payback period is:

rev: 12_24_2013_QC_42995

3.00 years.

3.61 years.

2.47 years.

4.47 years.

3.47 years

A company is considering the purchase of a new machine for $30,400. Management predicts that the machine can produce sales of $13,600 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $7,200 per year plus depreciation of $3,600 per year. The company's tax rate is 40%. What is the approximate accounting rate of return for the machine?

2.2%

35.5%

11.1%

9.2%

18.4%

A company is considering the purchase of a new machine for $160,000. Management predicts that the machine can produce sales of $29,500 each year for the next eight years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $8,000 per year plus depreciation of $16,200 per year. The company's tax rate is 40%. What is the payback period for the new machine?

50.31 years

7.44 years

5.42 years

30.19 years

8.26 years

A company is planning to purchase a machine that will cost $102,000, have a six-year life, and be depreciated using the straight-line method with 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.

Sales		$168,000
Costs:
Manufacturing	$71,500
Depreciation on machine	17,000
Selling and administrative expenses	49,500	(138,000)
Income before taxes		$ 30,000
Income tax (50%)		( 15,000)
Net income		$ 15,000

What is the accounting rate of return for this machine?

4%

33.30%

50.00%

14.71%

29.41%