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A company is planning to purchase a furnace that would cost $20,000 and save the company $4,000 pretax annually. It has an estimated useful life
A company is planning to purchase a furnace that would cost $20,000 and save the company $4,000 pretax annually. It has an estimated useful life of seven years with no salvage value. The company would depreciate the furnace using the straightline method. The company has an effective income tax rate of 30%. Assuming no change in working capital, the payback period for the furnace is
A 4.12 years.
B 7.14 years.
C 5.00 years.
D 5.47 years.
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