Question
A company is planning to purchase a machine that will cost $24,600, have a six-year life, and be depreciated over a three-year period with no
A company is planning to purchase a machine that will cost $24,600, have a six-year life, and be depreciated over a three-year period 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. What is the payback period for this machine? Sales $93,000 Cost: Manufacturing $52,100 Depreciation on machine 4,100 Selling and administrative expenses 31,000 (87,200) Income before taxes $5,800 Income tax (35%) (2,030) Net income $3,770 6.00 years. 6.53 years. 13.05 years. 1.87 year. 3.13 years.
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