A company is considering the purchase of a new machine for $58,000. Management predicts that the machine can produce sales of $17,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $7,000 per year including depreciation of $5,000 per year. The company's tax rate is 40%. What is the payback period for the new machine?

a. 3.41 years.

b. 6.44 years.

c. 5.27 years.

d. 11.60 years.

e. 32.22 years.

Carmel Corporation is considering the purchase of a machine costing $54,000 with a 7-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment?

a. $27,000.

b. $30,857.

c. $54,000.

d. $8,816.

e. $7,714.