A company is planning to purchase a machine that will cost $33,000 with a six-year life and 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				$	99,000
Costs:
Manufacturing	$	55,000
Depreciation on machine		5,500
Selling and administrative expenses		33,000			(93,500	)
Income before taxes				$	5,500
Income tax (40%)					(2,200	)
Net income				$	3,300

Multiple Choice

• 6.00 years.

• 3.75 years.

• 10.00 years.

• 1.25 year.