A company is planning to purchase a machine that will cost $28,800, 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		$114,000
Cost:
Manufacturing	$52,800
Depreciation on machine	4,800
Selling and administrative expenses	38,000	(95,600)
Income before taxes		$18,400
Income tax (30%)		(5,520)
Net income		$12,880

a. 3.37 year.

b. 1.63 years.

c. 4.47 years.

d. 6.00 years.

e. 2.24 years.

A company is planning to purchase a machine that will cost $28,800, 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 accounting rate of return for this machine?

Sales		$114,000
Costs:
Manufacturing	$52,800
Depreciation on machine	4,800
Selling and administrative expenses	38,000	(95,600)
Income before taxes		$18,400
Income tax (30%)		(5,520)
Net income		$12,880

a. 89.44%.

b. 33.33%.

c. 4.80%.

d. 44.72%.

e. 50.00%.